UK second-quarter retail sales growth strongest since 2004, but apparel suffers

British retail sales grew by the most in over a decade in the second quarter of 2018, official data showed on Thursday, giving the Bank of England reassurance shoppers had shaken off a sluggish start to the year as it considers raising interest rates.


Asos reported rapid British sales growth last week, but traditional clothing retailers have struggled. - Photo: Asos

Retail sales volumes in June alone were down 0.5 percent from May as the World Cup kept some shoppers out of stores and at the low end of economists' forecasts in a Reuters poll.

But sales for the second quarter as a whole were 2.1 percent higher than the first three months of the year, the biggest calendar-quarter increase since the first quarter of 2004.

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, and 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 percent higher than a year earlier versus forecasts of a 3.7 percent rise, slowing from 4.1 percent in May, which had been the fastest growth rate since November 2016.

The figures contrast with relatively soft wage growth and inflation data earlier this week which caused some economists to question whether the BoE will press ahead with a widely expected interest rate rise next month, only its second since the 2008 global financial crisis.

The ONS said the strong data for the retail sector - which makes up just 5 percent of the economy - would probably add 0.1 percentage points to second quarter GDP growth.

Earlier this month BoE Govenor 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.

Overall economic growth in Britain this year is likely to be the weakest since 2012, according to the International Monetary Fund, which cut its forecast to 1.4 percent on Monday.

Cunliffe's view got a boost on Tuesday, when fresh data showed earnings rising at the slowest rate in six months. And on Wednesday inflation unexpectedly held steady, in part because heavy discounting of clothing negated the effect of higher fuel prices.

The latest retail sales data showed clothing sales suffered from the heat, but food and drink retailers did well as shoppers took advantage of unusually hot weather.

"However ... continued growth in food sales (was) offset by declining spending in many other shops as consumers stayed away from stores and instead enjoyed the World Cup and the heatwave," ONS statistician Rhian Murphy said.

Online clothing retailer ASOS reported rapid British sales growth last week, outstripping overseas sales.

But traditional clothing retailers such as Marks & Spencer , Debenhams and House of Fraser have struggled, and furniture retailers DFS and Dunelm last week reported lacklustre results, in part due to hot weather keeping shoppers away.
 

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