UK retail sales weren’t as strong as analysts expected in July

Price deflation meant that total retail sales in July were only up by 1% in value on the same month in 2014.

UK retail sales volumes rose by 0.1% in July, after falling the previous month, the Office for National Statistics (ONS) has said.

A drop in petrol and food sales respectively knocked 0.8 percentage points and 0.3 percentage points from growth in retail spending last month, compared with the same month a year ago. It came in at +0.4% in July 2015, compared to the preceding month.

U.K. retail sales excluding auto fuel rose in July, led by department stores along with furniture and household electrical appliances.

But the rise in sales was lower than the 0.4% rise expected by most economists, with a fall in fuel sales on forecourts holding back progress in the retail sector.

The data also showed that average store prices fell by 3% year on year, largely due to an 11% fall in petrol prices.

Dominic Bryant, an economist at BNP Paribas, was extra optimistic, saying that the “current fall in oil costs ought to help actual incomes and, subsequently, retail gross sales within the coming months”. Against the euro, the pound fell to 71.42 pence, its weakest in six days, before recovering modestly to 71.32 pence, still down 0.6 per cent on the day.

Low inflation and faster wage growth, along with a booming housing market, are helping to support consumer spending.

“The figures suggest that consumer spending will remain a positive contributor to economic growth in the third quarter, but at a more moderate pace than earlier in the year”, Mr Hawksworth said.