British consumers shrugged off fears of a global recession to take advantage of the summer sales, official figures showed yesterday.
Retail sales volumes rose by 0.6 per cent in July, faster than expected. This took the annual rate of growth to 6.0 per cent compared with 5.6 per cent in June. "Apart from Ireland, the UK has the strongest retail sales growth in all the developed world," said John Butler, UK economist at HSBC.
The detailed breakdown showed growth was concentrated in particular sectors and was closely linked to price cuts by retailers. This prompted some analysts to identify the first sign of a slowdown in consumer growth, although others said it was another nail in the coffin of an imminent interest rate cut.
National Statistics, the Government office, said the growth was driven by the non-food sector, which saw its first monthly increase since May, with annual growth running at 7.4 per cent.
Within this, sales of shoes and clothes rose by 1.3 per cent in July to take the annual rate to an all-time record high of 11.8 per cent. However the value of sales rose 8.3 per cent, implying prices are falling by some 3 per cent a year.
Meanwhile non-store retailing mainly mail order catalogues rose at an unprecedented monthly rate of 6.1 per cent. Without these two sectors overall growth would have been 0.3 per cent.
In contrast there was no growth in sales of household goods, which means sales have actually fallen by 0.4 per cent over the last three months.
Danay Gabay, UK economist at JP Morgan, said consumers might have run out of money to furnish their increasingly expensive homes and "it could be the first sign of a retrenchment on the part of the seemingly unflappable British consumer."
Michael Saunders, of Schroder Salomon Smith Barney, said there was no sign of the slowdown in consumer spending the Bank of England wants to see. "These are more signs that domestic pressures seem stronger than the Bank had expected," he said.Reuse content