Sunshine lifts UK retail sales in June, points to tick-up in economy: ONS

A woman walks under advertising outside a branch of clothing retailer Next in London, Britain.
A woman walks under advertising outside a branch of clothing retailer Next in London, Britain.PHOTO: REUTERS

LONDON (REUTERS) - Sunny weather helped British retail sales rise more strongly than expected in June and shake off a gloomier start to the year, offering some signs that the economy as a whole might be regaining speed after a lull.

Britain's economy went through a soft patch at the start of the year, and data since then have been mixed, as consumers feel the squeeze from higher inflation driven in large part by last year's vote to leave the European Union.

The Bank of England is in the process of revising its economic forecasts and, in two weeks' time, will announce if it will raise interest rates for the first time in a decade.

Retail sales volumes rose by 0.6 per cent month-on-month in June, beating economists' forecasts in a Reuters poll for a 0.4 per cent rise, the Office for National Statistics said, after falling 1.1 per cent in May.

Looking at the three months to June as a whole, which smooths out monthly volatility in the data, sales rose by 1.5 per cent, cancelling out a 1.4 per cent drop in the first three months of 2017, the weakest calendar quarter since 2010.

"A particularly warm June seems to have prompted strong sales in clothing, which has compensated for a decline in food and fuel sales this month," ONS statistician Kate Davies said.

Compared with a year earlier, retail sales rose 2.9 per cent in June, beating forecasts in a Reuters poll. The ONS said Thursday's retail data was likely to add 0.09 percentage points to the growth rate of the overall economy in the second quarter, which was just 0.2 per cent in the first three months of 2017.

Weaker consumer demand is a key reason many economists predict growth will slow this year, though the Bank of England expects stronger exports and business investment to compensate.

Despite a surprise fall in inflation last month, prices are still rising at close to their fastest rate in four years, and weak wage growth means many households feel under financial pressure as Britain starts talks to leave the European Union.

Last month also saw Prime Minister Theresa May unexpectedly fail to win a parliamentary majority in the snap election she called for on June 8, which hurt consumer sentiment according to some surveys.

A further pass through of the effect of last year's fall in the pound may still be to come.

Clothing and footwear retailer Sports Direct reported a 28.5 per cent slump in full-year core earnings on Thursday, after it did not pass on to shoppers the full increase in its import costs caused by the weaker pound.