U.K. Retail Sales Rise More Than Economists Forecast

U.K. Retail Sales Rise More Than Economists Forecast

July 22 (Bloomberg) -- U.K. retail sales rose more than economists forecast in June as the World Cup tournament stoked purchases at electrical goods shops and department stores.

Sales climbed 0.7 percent on the month, the Office for National Statistics said today in London. Economists forecast a 0.5 percent gain, according to the median of 24 estimates in a Bloomberg News survey. From a year earlier, sales rose 1.3 percent.

Consumer spending may be strengthening after unemployment fell in the three months through May as the recovery gained momentum. While economists forecast the economy doubled its pace of growth in the second quarter, shoppers may limit purchases as the government implements the biggest budget squeeze since World War II to reduce the record deficit.

“We see a slow and steady increase in consumer spending as the recovery gains traction,” Philip Shaw, an economist at Investec Securities in London, said in a telephone interview. “Fears about government spending cuts will probably have some effects on consumer psychology.”

The pound extended its gain against the dollar after the report and was up 0.5 percent to $1.5246 as of 9:43 a.m. in London.

Department Stores

Sales at non-specialized stores, which includes department stores, rose 1.5 percent in June from May, while sales at household goods shops jumped 1.6 percent. Statistics office officials said electrical goods stores benefited in the run-up to the World Cup soccer tournament and from promotions to lure shoppers.

John Lewis Partnership Plc, owner of the namesake department stores and Waitrose supermarkets, said last week that sales at its department shops rose 9.1 percent in the week ending July 10 from a year earlier.

Food sales rose 0.6 percent on the month and were down 0.2 percent from a year earlier, the statistics office said. In the quarter through June, food sales were up 0.9 percent from the previous three months. Non-food sales gained 1.2 percent on the month and climbed 1.5 percent on a three-month basis.

Excluding fuel, retail sales increased 1 percent in June from May and were up 3.1 percent on the year.

Price Deflator

Today’s report showed that the implied deflator, a measure of annual price changes in shops, was 1.3 percent higher than a year earlier. That compares with 2.4 percent in May and is the lowest since November. The deflator for households goods stores was minus 1.3 percent.

The U.K. inflation rate rose to a 17-month high in April and was at 3.2 percent in June, above the government’s 3 percent upper limit. Consumers’ expectations for price increases for the coming year eased to 2.7 percent this month from 3 percent in June, which was the highest in 21 months, Citigroup Inc. said yesterday, citing a YouGov Plc poll.

Bank of England officials said in the minutes of their July 8 meeting that while the impact of the budget measures on the economy were “hard to gauge,” it was “likely that they had pushed down a little on the most likely path for output.”

Marks & Spencer Group Plc, the U.K.’s largest clothing retailer, said July 7 it’s “cautious” about the outlook for consumer spending after reporting slowing first-quarter sales growth.

The economy probably expanded 0.6 percent in the second quarter, twice the pace in the previous three months, according to the median of 32 economists in a Bloomberg News survey. The statistics office is due to publish its preliminary estimate of GDP in the second quarter tomorrow at 9:30 a.m. in London.

source: bloomberg.com