LONDON (Reuters) - Retail sales jumped in July even as prices rose at their fastest rate in a decade, official figures showed on Thursday, calling into question the scale and speed of the consumer slowdown.
The Office for National Statistics said sales volumes rose by 0.8 percent last month, wrongfooting analysts who had forecast a 0.3 percent decline.
“Despite an intensifying squeeze on household budgets, the UK consumer is down but by no means out,” said Geoffrey Dicks, economist at RBS.
The pound vaulted higher and interest rate futures fell as investors scaled back bets on imminent interest rate cuts from the Bank of England.
Still, the volatility of the sales figures of late left analysts reluctant to read too much into one month’s release.
Surveys of business and consumer sentiment have painted a consistently gloomy picture, but official data have varied wildly, with a record 3.9 percent rise in May followed by a record 4.3 percent fall in June.
“This number warrants caution in its interpretation,” said Alan Clarke, economist at BNP Paribas. “We have to look through short term volatility.”
Sales were 2.1 percent higher on the year, the lowest rate since February 2006 but still stronger than surveys from groups such as the British Retail Consortium and the Confederation of British Industry.
One reason for the disparity could be the strong rise in online shopping, which is captured more fully in the official data.
Capgemini’s e-retail sales index showed online retail sales rose by 11.3 percent in the month of July to 4.8 billion pounds, the equivalent of 79 pounds for every person in Britain.
The statistics office noted discount food stores and cheaper product lines had been doing particularly well, probably as consumers change their behaviour in response to soaring food and fuel prices.
This tallies with research from data group Nielsen which showed low-cost supermarket chains Asda and Wm Morrison outperformed their peers with quarterly sales growth up more than 8 percent in the 12 weeks to mid-August.
Retail sales growth on the month was broad-based with household goods, clothing and footwear, and other stores all reporting gains.
The gains came despite strong prices rises, particularly in the food sector. Overall retail prices were on average 1.6 percent higher than a year ago, the biggest jump since May 1998. Food inflation surged to 6.2 percent — its fastest increase since March 1992.
Analysts expect the next rate move from the Bank of England to be down. But with inflation running at more than double the Bank’s 2 percent target, most are not expecting a cut until November at the earliest.
There was more bad news on the inflation front on Thursday as energy provider E.ON said it would increase its gas prices for residential customers by 26 percent from this week.
Other providers have already announced stiff price increases in response to higher wholesale prices.