UK June retail sales growth slows to 0.2 pct vs May; annual growth worst in a yr

UK June retail sales growth slows to 0.2 pct vs May; annual growth worst in a yr

	Published : Thu, 19 Jul 2007 09:48 By : Agencies Print this Story

LONDON (Thomson Financial) - Retail sales slowed in the UK in June, with annual growth at its slowest in a year, reflecting the month's dismal weather and the increased burden on households' disposable incomes from higher interest rates.

The office for National Statistics reported June retail sales rose by 0.2 pct from May in seasonally adjusted terms, a slowdown from that month's 0.4 pct, and missing analyst expectations for an unchanged reading.

Analysts had expected sales to remain strong after surprisingly strong survey evidence for June from the British Retail Consortium, a leading business lobby.

The slower retail sales, reflecting lower demand, should be encouraging for the Bank of England as it seeks to bring inflation back down to the 2.0 pct target.

The BoE has raised borrowing costs five times in the past year in a bid to rein in inflation, which has remained stubbornly above the 2.0 pct target for over a year.

CPI inflation in July was 2.4 pct, confounding market expectations for the inflation rate to decline closer to the BoE's target.

In year on year terms, the official data showed June's sales were up 3.4 pct as against a rise of 3.9 pct in May, marking the lowest yearly growth since the same month last year and missing expectations for a rise of 3.6 pct.

A closer look at the retail figures showed increased sales for almost all retail sectors in monthly terms.

The exceptions to this were food stores, which were hit by the poor weather. Food sales fell 1.1 pct from May, the widest decline since August last year. Sales at non-store retailers also fell, by 1.5 pct.

The biggest growth was registered by non-specialised retailers such as department stores, which began their sales periods earlier than last year. Sales in this sector were up 4.1 pct in June from May.

The statistics office also said retail sales were up 1.1 pct in the three months to June from the previous three-month period, and 3.8 pct higher than the same period last year.

Based on non-seasonally adjusted data, the average weekly value of retail sales in June was 5.0 bln stg, 3.8 pct higher than in June 2006 and slightly up on May's 4.9 bln stg in May.

Meanwhile, the implied deflator -- a leading price indicator -- edged up 0.1 pct on June last year, slowing from May's 0.5 pct rise -- which was itself a slowdown from the previous month's seven-year high of 1.0 pct.

alex.brittain@thomson.com

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