Sunny weather sparks sharp growth in UK retail sales

UK retail sales smashed expectations in July as a heatwave drove more customers into stores (release).

Year-on-year, UK retail sales increased by 3.0 per cent, beating already optimistic expectations of a 2.5 per cent increase from 2.2 per cent growth the month before.

Growth came primarily from the food and non-store retailing sectors, with the quantity of food bought rising 2.1 per cent annually - the biggest increase since April 2011.

Feedback from supermarkets suggested that the hot weather drove customers towards food, alcohol, clothing and outdoor items. Data from the Met Office shows that the month was the third warmest July on record, with a mean temperature of 17°C - beaten only by 1983 (17.3 °C) and 2006 (17.8 °C).

But it wasn't just the sunny weather. Online sales showed strong growth, up 1.7 per cent. Sales were likely also helped by the birth of the royal baby and Andy Murray's victory at Wimbledon.

Compared to June 2013, retail sales grew by 1.1 per cent, up from 0.2 per cent growth the month before. Analysts had expected to see sales rise by 0.6 per cent. Supermarket sales again drove growth, rising by 2.5 per cent over the month.

However, the good headline figure risked masking more negative news. For example, department store sales fell by 1.6 per cent month-on-month while household goods fell by 1.3 per cent.

The price paid for goods rose by 1.8 per cent year-on-year - consistent with the latest consumer price index for the month. The estimated weekly spend was £7.0bn, up from £6.8bn the month before and £6.7bn in July 2012.

Fuel sales had almost nothing to do with the growth, with sales excluding fuel increasing by 3.1 per cent year-on-year and 1.1 per cent month-on-month. Analysts had been expecting growth of 2.7 per cent and 0.6 per cent growth in supermarket sales with a rise of 2.5%.

In a separate report released last week, the British Retail Consortium said sales volumes in July were the highest for any month since August 2006.

This will be seen as further evidence of a strong economic recovery, potentially reducing the likelihood of it taking three years for unemployment to hit the seven per cent threshold required for the Bank of England to hike rates.

The pound jumped to a two-month high against the dollar - up as high as $1.5589 at one point.