UK retail sales grow at fastest since 2004
london — British shoppers stepped up purchases by the most in over a decade in the second quarter despite lower spending in June, official data showed on Thursday, giving the Bank of England some reassurance that a sluggish start to 2018 is over.
Retail sales volumes in June alone unexpectedly fell 0.5 per cent from May — at the low end of economists’ forecasts in a Reuters poll — as the World Cup kept some shoppers out of stores after extremely rapid growth during the previous two months.
Sales for the second quarter as a whole were 2.1 per cent higher than the first three months of the year, the biggest calendar-quarter increase since the first quarter of 2004, Britain’s Office for National Statistics said.
But financial markets honed in on the weaker June figure, which pushed sterling below $1.30 for the first time since September 2017, after a week in which the British currency has been battered by political disputes over Brexit. “An August rate hike is in the balance. Whether or not one is delivered, the trajectory thereafter will be extremely shallow,” said Tom Stevens, an investment director at fund manager Fidelity International. Most economists polled by Reuters at the start of the week predicted that the BoE would raise rates on August 2 for only the second time since the financial crisis. HSBC’s Elizabeth Martins, while expecting sales growth to slow further this year, said the BoE was likely to focus on the strong quarterly data as it had taken a ‘glass half full’ approach to the UK economy of late.
But the dip in sales in June — which follows soft wage growth and inflation figures earlier in the week — revived some investors’ concerns that they may see a repeat of May, when the BoE held off from a widely expected rate rise due to a string of soft data in the run-up to its policy meeting.
Retail sales growth and Britain’s economy overall slowed in the first three months of 2018, due to heavy snow as well as ongoing pressures from high inflation and the anticipation of next year’s Brexit. The BoE said in May it would delay raising rates until it was sure that growth was back on track.
June retail sales were 2.9 per cent higher than a year earlier versus forecasts of a 3.7 per cent rise, slowing from 4.1 per cent in May, which had been the fastest annual growth rate since November 2016.
The ONS said the strong data for the retail sector — which makes up just five per cent of the economy — would probably add 0.1 percentage points to second-quarter GDP growth.
Earlier this month BoE governor Mark Carney said the economy appeared to be growing as forecast bolstering market expectations for a rise — though his deputy Jon Cunliffe, who opposed the last rate rise in November, said wages were growing a bit less than the BoE had forecast. —