Retail sales rise in second quarter gives glimmers of hope to British economic growth

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Londoners Shop On Christmas Eve For Last Minute Presents
Consumer spending has come under pressure from higher prices in recent months (Source: Getty)

Retail sales bounced back during a warmer second quarter, raising hopes the resilience of the British consumer will continue to fuel UK economic growth.

Sales rose 0.6 per cent in June in terms of the volume bought, with a quarterly sales increase of 1.5 per cent, the Office for National Statistics (ONS) revealed today.

Retailers were hit by the biggest quarterly decline in retail sales since 2010 in the first quarter of the year, as higher inflation weighed on consumer spending, but overall sales volumes have now recovered to around the same point at the start of the year.

Read more: British retail sales plummet at fastest quarterly rate since 2010

Anecdotal evidence suggested warmer weather contributed to the increase, the ONS said.

Kate Davies, a senior statistician at the ONS, said: “Today’s retail sales figures show overall growth. A particularly warm June seems to have prompted strong sales in clothing, which has compensated for a decline in food and fuel sales for the month."

While retail sales data tend to be volatile, particularly on their first estimation, the figures nevertheless seems to indicate consumers are continuing to spend, despite surveys showing steep falls in confidence.

Richard Lim, chief executive of consultancy Retail Economics, said: “Any anxiety over the general election, Brexit or the squeeze on disposable incomes appears to have been put to one side for the moment."

Chris Williamson, chief business economist at data firm IHS Markit, said: "The fact that retail sales growth picked up in the second quarter adds to signs from PMI [purchasing managers' index] business survey data that economic growth likely perked up after the lacklustre 0.2 per cent expansion seen in the first three months of the year."

Weakening consumption was blamed for the slowdown in overall UK GDP growth in the first quarter, as price rises ate up Britons' spending money.

Read more: Real wage fall fastest in three years as Britons feel the inflation squeeze

Consumer price inflation rose as high as 2.9 per cent in May, but has since moderated to 2.6 per cent in June, with economists split as to whether prices will continue their rapid rate of increase.

The annual rate of increase of average store prices slowed to 2.7 per cent in June, down from 3.2 per cent in May, suggesting the inflationary pressure from sterling's devaluation may have peaked.

However, inflation is still expected to stay well above wage growth for some time. Wages grew 1.8 per cent year-on-year in the three months to April.

Lim said: “We still expect pressures facing households to intensify in the coming months. Real earnings are expected to remain in negative territory for the remainder of the year. Retailers will be hoping shoppers remain resilient in the face of further uncertainty.”

Read more: British consumer confidence takes a big inflation hit

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