 Despite a monthly rise, annual growth is at a two-year low |
UK retailers defied predictions of another monthly sales slump in July despite pushing up prices, according to official figures. The Office for National Statistics said retail sales were up 0.8% last month, reversing a sharp fall of 3.9% in June. Analysts had been expecting a drop of 0.2% as cost-conscious consumers continue to struggle with high fuel and food bills and mortgage repayments. The data was questioned as it clashed with evidence hinting at grimmer news. Disputed The British Retail Consortium (BRC), which produces its own survey of retail sales, disputed the idea that July's sales were higher than June. "Consumer confidence remains low, unemployment is rising and the housing market weakening," said Stephen Robertson, BRC director general. "It's hard to see what could produce the sales growth boost ONS are reporting or their finding that smaller retailers are outperforming larger ones," he added. The ONS figures measure the volume of sales and some experts believe the value of transactions gives a more accurate picture of High Street conditions. Some economists were also sceptical that the data, which has caused controversy since May figures showed a surge in sales of 3.6%, reflected the reality on the High Street. "There has not been this level of volatility in the ONS monthly sales data in three decades," said David Page, an economist at Investec. Consumer resilience? The ONS monthly figures for July cut the annual rate of growth to 2.1% - the lowest in two years. But this was still only modestly lower from the 2.2% year-on-year rate recorded in June. Retailers across the board reported a good month in a sign that the consumer slowdown may not be as sharp as feared. Food sales rose 0.3% as shoppers hunted out bargains at discount stores, such as Aldi and Lidl, as well as budget lines within the bigger supermarkets. Sales of household goods and clothing also held up well, although the ONS pointed out they were coming off a very low base with falls in June. "Despite an intensifying squeeze on household budgets, the UK consumer is down but by no means out," said Geoffrey Dicks, an economist at Royal Bank of Scotland. Rising prices The better-than-expected figures came even as retailers were forced to raise prices to prevent inflation from eroding their bottom line. Prices on average rose to their highest level since 1998 - up 1.6% compared to a year ago. This was largely driven by the soaring cost of food, which rose at the fastest pace since 1992 - up more than 6%. With annual consumer price inflation - which rose to 4.4% in July - beginning to feed into retail prices, an imminent interest rate cut remains unlikely, some economists observed. But many also concluded that July's figures did not represent a pick-up in consumer confidence and sales were likely to weaken in the coming months as the economy slows further.
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The UK consumer is down but by no means out
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