Economists still upbeat on UK despite retail sales dip

British retail sales suffered an unexpected dip last month, wrong-footing economists who said rising wages and lower prices still pointed to strong prospects for consumer spending, a mainstay of growth.

Sterling slid half a cent against the dollar after the Office for National Statistics reported a 0.2% fall in June retail sales yesterday, prompting traders to reconsider bets on a Bank of England rate rise before the end of the year. Annual retail sales growth fell to its lowest in nine months at 4%, down from 4.7% in May and well below the forecasts of economists polled by Reuters. The data adds to uncertainty about how strongly Britain’s economy is bouncing back from a weak patch at the start of the year, after figures last week showed an unexpected rise in the unemployment rate for the first time in more than two years.

“The retail sales numbers are slightly disappointing relative to consensus ... (and) may take some wind out of the sails of an increasingly hawkish market, but not, we suspect, for long,” said Liz Martins, UK economist at HSBC.

Bank of England policy discussions released on Wednesday showed a growing number of policymakers were edging towards voting for a rate hike, and Governor Mark Carney said on Tuesday that this could come into focus around the turn of the year.

Reuters