Yahoo Finance Higher retail sales gives Bank of England fuel for interest rate rises
UK retail sales volumes beat expectations in June, rising by 0.7% on the start of a busy summer sales period, according to new official data.
Numbers were buoyed by the extra bank holiday, the hottest June on record, and department stores and furniture shops also having a strong month, the Office for National Statistics said. These were partially offset by falls in fuel, garden centres and clothes shops.
Non-food store sales volumes rose by 1.0% in June, following a fall of 0.5% in May 2023; department stores and furniture retailers reported that summer sales and increased footfall helped boost volumes.
Meanwhile, food stores sales volumes bounced back with 0.7% growth, following a fall of 0.4% in May.
"Overall, the positive trend for retail sales through the second quarter gives us cautious optimism for the outlook for the rest of 2023," said Lisa Hooker, PwC's leader of industry for consumer markets.
"Despite the cost-of-living crisis, wage and benefit increases have put more pounds in shoppers’ wallets just as inflation has started to ease."
The figures come following lower than expected official numbers on UK inflation on Wednesday. The latest reading of 7.9% was the lowest in 15 months, since May 2022.
Economists predicted that the rate would dip to 8.2% from 8.7% in both April and May. This, however, is still way above the Bank of England's target of 2%.
Although spending is on the up and inflation appears to be cooling, some analysts say interest rate rises remain on the horizon.
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“The retail sector acts as a bellwether for the UK economy in terms of consumer demand and can indicate how confident the wider public are in their finances," said Phil Monkhouse, head of sales at financial services firm Ebury.
"In this case, the continued resilience suggests continued rate hikes are yet to inflict the damage on household budgets as may have been expected and spending power remains resilient.
“The surprisingly positive inflation print on Wednesday defied economists’ predictions and while the Bank of England may maintain its hawkish policy stance for a while yet, the end of the rate hike cycle appears in sight.”
Watch: Retail sales jumped 0.7% last month with sunshine boost helping beat expectations
