July 19, 2012 / 8:51 AM / 8 years ago

Instant View - Retail sales weaker than expected in June

LONDON (Reuters) - British retail sales volumes grew much less than expected in June, after fuel sales fell and bad weather hit demand for barbecue food, the Office for National Statistics said on Thursday.


“The headline here is clearly gloomy and fairly worrying in terms of the picture in paints of the health of the UK consumer. We had certainly hoped that there would be a Diamond Jubilee boost in these and if anything this is one of the small positive areas of the Jubilee effect, everything else looks to be negative for GDP.

“We had considered UK consumers to be fragile. They are very nervous to go out there and spend on the high street, which isn’t a huge surprise given that wage growth still hasn’t caught up with headline inflation despite the moderation that we’ve had.

“Certainly there are no real signs that any UK recovery perhaps in the third quarter is going to come from a pick-up in consumer demand.

“Our second-quarter GDP forecast will be fairly gloomy, we are looking at down 0.4 percent on the quarter... If anything, this emphasises the risk to the downside of that forecast.”


“Assuming the weather forecasters are right, then food sales should bounce back in coming months.

“Additionally, we suspect that the big drop in June fuel purchases may be related to the extra bank holiday with people travelling to work less than they usually do.

“However, consumer confidence remains weak and we suspect that consumer spending will remain soft through this year. That said, the Olympics may provide a modest boost to sales, particularly with tourists coming in and suggestions that fewer Britons are travelling abroad for holidays.

“Then there is the pick-up in employment (up nearly 250,000 since September) and with inflation slowing sharply the squeeze on the household sector may soon gradually loosen.”


“June’s unusually bad weather may have discouraged consumers from spending — although it was notable that clothing sales rose by 2.5 percent, as consumers were attracted by the earlier start to summer discounting.

“Sales might get an uplift in July and August from the Olympics. The fact that the squeeze on real pay is now almost over is another positive.

“Nonetheless, we continue to think that rising unemployment later this year and households’ focus on paying off their debts are likely to prevent a sustained recovery in consumer spending.”


“Today’s retail figures can primarily be attributed to the fall in inflation, coupled with the early arrival of the summer sales. These in turn have been driven by the unseasonal weather patterns forcing retailers to heavily discount summer stock.

“Whilst these figures paint an improving picture, the underlying climate within the retail sector remains extremely tough.

“A few retailers are delivering strong performances, however the majority are feeling the strain. The non-food sector has, for the past 25-30 years, been fuelled by volume growth as consumers bought more year-on-year.

“However, in recent times consumers have been buying less as disposable income has come under increasing pressure against a backdrop of rising prices.

“Lower inflation may offer some relief but this reversal cannot be overstated. The sector faces a fundamental challenge as it must adapt to the new consumer who is driven by value as opposed to volume.”


“The headline volumes number is pretty much in line with forecasts, but these forecasts were made before we saw the larger than expected drop in inflation.

“So if you look at the values number — which I think is the better gauge of demand because we’ve had these big swings in inflation in recent months in both directions — that was down half a percentage point. For me, that is quite weak.

“The amount of money being spent fell, but we got a rise in volumes because inflation fell very sharply and we had what looks to be this significant front-loading of clothing price discounting and we had a bit of food price disinflation as well.

“At face value...it’s softer. But having said that, this is a fairly volatile series.

“If you take this week’s numbers as a whole — the sharper fall in inflation, the stronger employment growth and then these weaker retail sales numbers — the bigger story is that retail purchasing power is slowly being restored as inflation falls back.”


“All in all the figures were not too bad, a little bit soft, but coming in one of the wettest Junes on record and with the Jubilee holiday it was always going to inject a degree of uncertainty.

“The data including fuel is weak, but I think this is predominantly because the weather limited the degree to which people were driving, and also an unwind from the (fuel-buying) panic, so I don’t think we need to take too much from that.

“In terms of GDP, I think the jury is really out on whether we are going to see another negative print in the second quarter growth rate. There was certainly contraction in industrial production, but the service sector may have shown a bit of growth. We’re probably looking at somewhere around a flat figure, maybe with risk slightly on the downside due to the construction sector and the effect of the weather.”

Reporting by UK bureau

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