UK retail sales fall 0.9 per cent in month of Brexit referendum

LONDON: UK retail sales had their biggest drop in six months in June, adding to signs that the vote to leave the European Union is starting to bite.

The volume of goods sold in stores and online dropped 0.9 per cent, more than the 0.6 per cent decline seen in a Bloomberg survey of economists, figures from the Office for National Statistics showed on Thursday. Sales excluding auto fuel also fell a largerthan-expected 0.9 per cent.

The monthly survey was carried out between May 29 and July 2, meaning some responses were received in the week following the June 23 Brexit referendum. While the statistics office said it had not received evidence from retailers of a Brexit effect, a GfK survey taken after the vote showed consumer confidence falling at the fastest pace in 21 years.

Consumer spending has driven the economy to more than three years of uninterrupted growth, but Britain may now be increasingly reliant on exports as the sharp fall in the pound over the past month makes British goods more competitive on world markets.

Bank of England policy makers have signalled they are preparing to add stimulus in August. Economists in a Bloomberg survey expect gross domestic product to fall by 0.1 per cent in each of the third and fourth quarters, marking the first recession since 2009.

The pound erased earlier gains, falling 0.1 per cent to $1.3194 as of 10:06 am London time.

Strong turnover in April and May saw retail sales rise 1.6 per cent in the second quarter, meaning the sector contributed to economic output during the period. Sales rose 4.3 per cent from a year earlier, boosted by events such as the European soccer championship and Queen Elizabeth II’s official birthday, the ONS said.

Food sales fell 1.2 per cent from the month before, while non-food sales dropped 0.8 per cent. Sales at department stores dropped 1.6 per cent and clothing and footwear retailers saw sales decline 1.8 per cent.

Store prices, as measured by the retail-sales deflator, rose 0.1 per cent on the month and were down 2.5 per cent from a year earlier. Anecdotal evidence from retailers suggests price pressures are starting to build as the pound’s deprecation pushes up the cost of imports.

“The strong suspicion is that consumers will face higher unemployment and less favorable purchasing power as inflation rises and earnings growth is limited by companies striving to limit their costs,” said Howard Archer, chief economist at IHS in London.