Retail sales to shrivel in June

By Christina Fincher

LONDON (Reuters) - Analysts had to rub their eyes last month when official figures showed UK retail sales volumes leapt in May at their fastest pace in more than two decades.

At a time when household incomes are being squeezed by rising living costs and newspaper headlines scream doom and gloom, it appeared too good to be true. It may be just that.

Economists polled by Reuters expect sales to have fallen by 2.5 percent in June, reversing most of May's 3.5 percent jump. And there is a strong chance earlier data may be revised down.

"It's most likely that we will get a much weaker reading this time," said Amit Kara, an economist at UBS.

"Household disposable income is falling, the savings ratio is low and companies keep saying how tough it is out there. The official figures at the moment just don't tally."

May's retail sales bonanza was at least partly fuelled by unseasonably hot weather. June may be payback time.

Survey evidence has been gloomy. The British Retail Consortium said like-for-like sales fell by an annual 0.4 percent in June, the third month in four that sales values have fallen in annual terms.

And a regional survey by the Bank of England on Wednesday suggested the boost to consumer spending from May's heatwave came undone.