Retailers edge ahead despite rain

Retailers scraped growth last month as a promotion-led boost for clothing stores was overshadowed by a weather-hit performance from food outlets.

Retail sales volumes edged 0.1% higher between May and June, the Office for National Statistics (ONS) said, which fell far short of City expectations of 0.6% growth.

The figures came as a number of retailers revealed a difficult summer, with Mothercare, JJB Sports and Halfords all revealing dismal results.

The wettest June on record since 1910 was behind a 0.7% drop in food sales last month, the ONS said, while clothing retailers saw sales jump 2.5% as they brought forward their summer sales.

The impact of discounting and slowing inflation was seen in the 0.5% drop in retail sales values between May and June.

Against expectations, the Queen's Diamond Jubilee celebrations proved to be a damp squib for retailers as the ONS said it did not have a "significant impact" on sales.

The weak performance in retail will dash any hopes that the economy might have emerged from its double-dip recession in the second quarter, ahead of official growth figures next week.

The economy entered a technical recession in the first quarter of the year, with gross domestic product declining 0.2%, following a 0.3% drop in the final quarter of last year.

The retail sector forms part of the powerhouse services industry, which accounts for 75% of the total economy in the UK.

The impact of the weather on food sales was reflected in inflation figures earlier this week, which showed the torrential rainfall had weighed on food retailers pricing power.

Elsewhere, department stores saw 0.2% growth in the period, while household goods stores grew by 0.3%.

The ONS reported 1.4% growth in so-called other stores, which covers a broad range of retailers, but was driven by sales in sporting goods and toys.

The total spent in the five-week period to June 30 was £32.7 million, which compares to £26.4 billion in the four weeks to May 26.

Internet sales continued to grow, rising 14.3% to £493.3 million, and accounted for 8.5% of all retail sales values.

Some economists had expected the Diamond Jubilee to lift retail sales with consumers buying food and drink for street parties, purchasing souvenirs, and taking advantage of the extra bank holiday to go to the shops.

Earlier, retail chain Halfords said chief executive David Wild had stepped down as the group warned over profits following a hefty slide in sales, while JJB Sports is to seek another round of rescue funds after seeing its turnaround hopes derailed by poor summer trading.

Samuel Tombs, UK economist at Capital Economics, said: "June's small rise in UK retail sales volumes suggests that the Queen's Jubilee provided only a negligible fillip to spending."

He added: "Particularly striking was the 0.7% fall in food sales - a sector which anecdotal evidence suggested had been boosted by the extra public holiday."

He went on: "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."

Richard Lowe, head of retail and wholesale at Barclays, said: "Most households are benefiting from the recent drop in inflation, including petrol prices, and although the weather has been less than ideal, consumers have spent more time indoors than out which has helped to boost sales of household goods."

PA