Mario Blascak, PhD
Independent Analyst
- Total UK retail sales fell -0.5% m/m in June while core UK retail sales excluding motor fuel sales decreased 0.6% m/m.
- Slumping retail sales add to the uncertainty regarding the prospects for the Bank of England hiking rates in August.
Retail sales were expected to deliver a solid increase in June as the proceeding English national team in the Football World Cup in Russia lifted the mood and promoted beer and BBQ sales according to the early retail sales reports.
Unlike the early estimates, the report from the Office for National Statistics (ONS) proved much darker economic reality for Britain with total UK retail sales falling -0.5% over the month in June while core retail sales excluding the motor fuel sales fell -0.6% m/m in June.
Over the year total retail sales increased 2.9% y/y in June, down from 4.1% in May and core retail sales decelerated to 4.0% y/y in June from 4.6% y/y in May.
“Retail sales grew strongly across the three months to June 2018 as the warm weather encouraged shoppers to buy food and drink for their BBQs. However, in June retail sales actually fell back slightly, with continued growth in food sales offset by declining spending in many other shops as consumers stayed away from stores and instead enjoyed the World Cup and the heatwave,” ONS senior statistician, Rhian Murphy said in the report.
The last three-months average growth rate of the UK retail sales lowered to 0.8%, down from 1.1% estimated previously. Lower retail sales in combination with the UK inflation decelerating above expectations add the uncertainty about the Bank of England’s willingness to hike the Bank rate on August 2, when it is scheduled to release its August Inflation Report accompanied with the press conference with Governor Mark Carney.
Regardless of the actual data, there is still about 75% probability of the Bank of England hiking the Bank rate in August, as the first-quarter economic slowdown is considered by the policymakers only a temporary weather-related blip.
Contribution to the annual growth rate of the UK retail sales
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