A SURPRISE fall in retail sales in July, marking the first drop for six months, rekindled worries yesterday that this year’s revival in consumer spending may falter or even stall.
The mixed effects of last month’s sizzling temperatures on consumers’ enthusiasm for the shops, as well as the end of a temporary sales boost from football’s World Cup, were blamed for the worse than expected official figures.
The volume of goods sold in high street stores and shopping centres fell by 0.3 per cent in July, ending a four-month run of 0.7 per cent gains, and confounding City forecasts that sales last month would still rise by 0.2 per cent.
After minutes of this month’s meeting of the Bank of England’s Monetary Policy Committee struck a less hawkish tone than expected, news of weaker high street conditions fuelled City speculation that the MPC will be in no hurry to raise interest rates again.
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“Following the fall in inflation in July and the fairly doveish tone of August’s minutes, the fall in retail sales suggests another near-term rate hike is not yet guaranteed,” Vicky Redwood, of Capital Economics, said.
The City remains divided over the rates outlook, however, with other economists arguing that the underlying trend in consumer spending is still relatively robust and betting that rates are still set to rise again in November.
Yesterday’s figures confirmed that, with sales volumes up 4 per cent year-on-year in July, and up by 1.8 per cent in the three months to July compared with the previous three months, high street activity remains markedly up on last year’s levels.