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Warmer June weather boosts UK retail sales

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Written by: Paloma Kubiak
20/07/2017
Shoppers returned to the high street in June, following a sharp drop in retail sales in May, official statistics reveal.

Retail sales increased by 1.5% in the second quarter. In June, they rose by 0.6% month-on-month, following a 1.1% drop in May. Between June 2016 and June 2017, retail sales increased by 2.9%, the 50th consecutive period of year-on-year growth.

The Office for National Statistics (ONS) revealed that the growth for Q2 follows a decline of 1.4% in the previous three months, leaving the figures broadly at the same level seen at the start of 2017.

The rise has been attributed to warmer weather and the introduction of summer clothing ranges, which helped boost clothing sales. This compensated for a decline in food and fuel sales for the month.

Average store prices (including petrol stations) increased by 2.7% on the year following a rise of 3.2% in May. This slowdown was largely attributable to weaker fuel prices.

Online sales increased year-on-year by 15.9% and by 1.8% on the month, accounting for approximately 16.2% of all retail spending.

‘The jump was badly needed’

Michael Baxter, economics commentator for The Share Centre, said this may seem like good news, but one-off factors explained much of the increase.

“The biggest danger lies with falling real wages. Although UK inflation fell back a little in June, real wages are still seeing sharp falls, and there is precious little evidence that employers plan to increase wages at a faster rate. With further falls in the pound following the UK election likely to push up inflation in a few months from now, the period of falling real wages is likely to continue, and this may create further downward pressure on retail.

“It was a relief to see such a strong performance in June, but this does not mean that retail woes are over, and investors should not read too much into the increase. The retail sector continues to struggle, and only retailers who apply an effective digital strategy will thrive.”

Ben Brettell, senior economist at Hargreaves Lansdown, said the news adds a renewed sense of optimism on the UK’s economic prospects: “Spending seems to be holding up despite falling real wages, and if the sterling-driven spike in inflation is finally receding, we could see a stronger contribution from the UK consumer in the second half of the year.”

Brettell added that sterling reacted positively to the figures, having fallen earlier in the day, gaining around a third of a cent against the dollar.

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