Retail sales slump in June

By Sumeet Desai and Matt Fallon

LONDON (Reuters) - Retail sales slumped in June at the sharpest rate on record, official figures showed on Thursday, more than wiping out May's record rise and dragging three-month growth down to its weakest since late last year.

Sales fell in all but one sector, with clothes, shoes and household goods sales severely hit. The sharper-than-expected decline drove the pound lower as investors bet the Bank of England may have to cut interest rates to bolster the economy.

However, policymakers concerned about simmering inflationary pressures may be worried to see shops prices being higher than last year -- the first increase in a year.

The Office for National Statistics said retail sales volumes fell 3.9 percent in June -- the sharpest fall since records began in 1986 -- after an upwardly revised 3.6 percent jump in May. Annual growth slumped to 2.2 percent from 7.9 percent.

Analysts had been expecting some payback for such a surprisingly strong performance in May, but had only forecast a monthly fall of 2.5 percent for an annual gain of 4.4 percent.

June's slide indicates consumer spending might be about to join a broad weakening in economic growth, with sales in the three months to June rising just 0.6 percent on the previous three months -- the weakest since December 2007.

"June's data finally showed the official data moving into line with the gloomy anecdotal evidence," said Vicky Redwood, an economist at researchers Capital Economics.

"What's more, we think that spending growth will weaken considerably further, as house prices keep falling and inflation and unemployment rise further."