UK retail sales volumes on the up

Department store discounts in the UK drove another rise in retail sales volumes in June, boosting hopes for overall growth figures due out next week, official figures showed today.

UK retail sales volumes on the up

Department store discounts in the UK drove another rise in retail sales volumes in June, boosting hopes for overall growth figures due out next week, official figures showed today.

The 0.2% month-on-month increase builds on a 2.1% rise in May - the first run of back-to-back growth in a year - according to the British Office for National Statistics.

It translates to growth in the sector of 0.9% over the second quarter, a rise that will push up overall gross domestic product by 0.1%.

The increase should contribute to a widely expected second three-month period of GDP growth for the British economy as hopes of a continued recovery rise. The figures are due to be published on July 25.

Supermarkets were hit as food store sales volumes fell slightly by 0.1% in June, while non-food stores grew 0.6%.

The largest contribution came from department stores, which saw a 3% increase, their strongest rise since March last year. Statisticians said it was driven by discounting and clearance sales.

There was also a 0.6% rise in household goods stores although the textile, clothing and footwear sector slumped by 0.3%.

The month saw weekly spending across all retail sectors reach £6.9bn (€7.96bn), up from £6.8bn (€7.8bn) in May.

Year-on-year, all retailing was up 2.2%, including a 5.3% rise from department stores but a 0.4% drop in food stores and a 2.1% fall in household goods retailers.

The figures are closely watched because the retail industry accounts for 5.7% of the economy.

Howard Archer, economist at HIS Global Insight, said: "The fact is that how much consumers spend remains critical for growth - despite the aspirations for the economy to become less dependent on the consumer and more balanced with greater contributions investment and exports."

Martin Beck of Capital Economics said there was growing evidence that a consumer-led recovery was under way - though the squeeze on incomes amid inflation that has now reached 2.9% remained a worry.

"While on the face of it, a monthly expansion in volumes of 0.2% in June looks like a fairly weak result in isolation, this is a decent out-turn after the hefty 2.1% rise seen in May," he said.

"Admittedly, with real incomes continuing to fall, the sustainability of a consumer revival remains in doubt. But, for now, retailers will no doubt be happy to make hay while the sun shines."

Ian Geddes, UK head of retail at Deloitte, said: "Today's figures will provide retailers with confidence.

"Last June's strong sales were boosted by the Queen's Jubilee celebrations, making this strong year-on-year increase all the more impressive.

"The weather will have lifted consumers' spirits and willingness to spend, as will a recent series of positive economic indicators including increased housing activity, stable inflation and a small rise in lending."

Peter Saville, partner at advisory and restructuring firm Zolfo Cooper, said: "The sun is certainly shining on the UK high street.

"Retailers have reacted well to the warm weather by discounting products and offering good value to their customers as the retail recovery gains momentum.

"Retailers need to make sure they capitalise on this warm weather so that they can thrive well beyond the current heatwave."

Helen Dickinson, director general of the British Retail Consortium, said while there were wide variations in the fortunes of individual retailers, the figures showed further evidence of recovery.

"Promotional activity has been strong and customers can find some great deals in the shops at the moment. As the good weather continues across the country, retailers will be hopeful that customers continue to take advantage of the offers that are available."

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