Pound dives as June retail sales undershot expectations
Retail sales in the three months to June increased by 2.1%, the strongest rise reported since 2004, according to the Office for National Statistics (ONS).
The largest uptick came from food stores, with shoppers stocking up on food and drink as barbecue season came into full swing.
But this also led to a decline in footfall in non-food stores, resulting in a monthly fall of retail sales by 0.5% in June.
Off the back of this news, sterling fell below the $1.30 floor, hitting its lowest level against the dollar in 10 months.
Renewed confidence to raise interest rates?
Ben Brettell, senior economist at Hargreaves Lansdown said: “The ONS said strong retail sales would add around 0.1% to second quarter economic growth. A conclusive rebound from a poor first quarter could give Bank of England policymakers renewed confidence to risk raising interest rates when they meet next month. Softer wage growth and inflation data this week had called into question whether higher interest rates were necessary or appropriate, especially given intensifying political uncertainty.”
Jacob Deppe, head of trading at online trading platform, Infinox, said June’s weak retail sales data is an “enigma” and could reduce the prospect of an interest rate rise next month.
He said: “It appears many households saw the hot weather and distraction of the World Cup as a welcome distraction from the high street rather than an excuse to spend. This week’s wage growth and inflation figures add to the picture of people feeling the pinch.
“While retail sales have been very strong over the past three months as a whole, the June drop-off has added to the uncertainty on rates next month.”