U.K. Retail Sales Unexpectedly Rise on Fuel Discounting: Economy

Pedestrians Pass Stores On Carnaby Street In London
U.K. retail sales unexpectedly rose in July as promotions helped to boost gasoline sales and food sales increased. Photographer: Simon Dawson/Bloomberg

U.K. retail sales unexpectedly rose in July as promotions helped to boost gasoline sales and food sales increased.

Sales including auto fuel gained 0.3 percent from June, the Office for National Statistics said today in London. The median forecast of 22 economists in a Bloomberg News survey was for a

0.1 percent decline. Sales in June were revised to a 0.8 percent gain from 0.1 percent, which means second-quarter sales fell 0.3 percent, less than initially estimated. The ONS said the change would have a negligible impact on gross domestic product.

The report follows factory and construction data suggesting GDP may have fallen less than the 0.7 percent estimated in the second quarter. Jobless claims dropped in July and the Bank of England says cooling inflation may help to bolster demand. Still, with the euro-area crisis showing little sign of abating and the U.K. government cutting spending, any recovery is likely to be only gradual.

“Together with yesterday’s firm looking jobs numbers, we continue to have doubts about the message from the GDP report, suggesting the U.K. is in a deepening recession,” said James Knightley, an economist at ING Bank NV in London. “That said, the uncertainty over the U.K. data, coupled with worries about Europe and the U.S. fiscal cliff will keep the BOE wary.”

The pound advanced against the euro and the dollar. It was

0.1 percent stronger at $1.5694 as of 11:42 a.m. London time and advanced 0.2 percent to 78.21 pence per euro.

Fuel Sales

Gasoline sales surged 2.6 percent in July from June, the statistics office said, partly due to promotions that saw fuel prices drop 0.8 percent on the month. Food sales rose 0.4 percent, while non-store retailing gained 1.4 percent. From a year earlier, overall retail sales increased 2.8 percent.

In the three months through July, sales rose 0.9 percent compared with the previous three months and were up 2.5 percent from a year earlier. Excluding fuel, sales were unchanged in July from June and were up 3.3 percent on the year.

The July trading period covered two days of the London Olympics and the statistics office said responses from retailers suggested there was no impact on sales from the games.

Today’s report also showed that the annual price deflator fell to 0.2 percent in July from 0.3 percent in June, the lowest since October 2009. The deflator on food declined to the lowest since February 2010. The statistics office said that for the past 2 1/2 years, increased sales at department stores has mainly been a result of “on-going promotions and discounting.”

Inflation Outlook

Bank of England policy makers forecast that inflation will ease toward their 2 percent target over the next year and have left the door open to more stimulus if needed. Minutes of their August meeting showed they voted unanimously to keep their bond-purchase target at 375 billion pounds ($588 billion) this month. Inflation accelerated to 2.6 percent in July.

Data yesterday showed jobless-benefit claims fell 5,900 last month from June. Unemployment as measured by International Labour Organization methods fell to a one-year low of 8 percent in the second quarter. Employment also rose in the quarter, suggesting hiring by private companies is making up for the loss of tens of thousands of public-sector jobs.

Elsewhere today, foreign direct investment in China fell to the lowest level in two years in July, fueling concern that waning confidence in the nation’s growth prospects may restrain any economic rebound. Investment declined 8.7 percent from a year earlier to $7.58 billion, the eighth drop in nine months and the smallest inflow since July 2010.

Euro-Area Prices

In Europe, euro-area inflation was 2.4 percent in July, the same as in June and May, the European Union’s statistics office in Luxembourg said, confirming an estimate published on July 31. Core inflation, excluding energy costs, quickened to 1.7 percent from 1.6 percent, the fastest since April 2009.

Spanish exports slowed in June, undermining the only growth driver left in the euro region’s fourth-biggest economy as the strictest austerity push in decades deepened the second recession since 2009. Spanish exports rose 5.1 percent to 18.9 billion euros ($23.2 billion) compared with a 10.8 percent increase a year earlier and a 6.2 percent increase in May, the Economy Ministry said in a statement from Madrid today.

In Switzerland, an index of investor confidence and analyst expectations increased to minus 33.3 in August from minus 42.5 in July, Germany’s ZEW and Zurich-based Credit Suisse Group AG said in a statement today.

U.S. Homebuilding

In the U.S., house building held near a four-year high in July, according to economists surveyed before a report from the Commerce Department due at 8:30 a.m. in Washington.

Builders broke ground on 756,000 houses at an annual rate, according to the median of 79 estimates compiled by Bloomberg News. June’s 760,000 pace was the highest since October 2008.

The Federal Reserve Bank of Philadelphia will say that manufacturing in its region shrank for a fourth month, economists forecast. The bank’s index climbed to minus 5 in August from minus 12.9 in July, according to the Bloomberg survey median. Figures less than zero indicate contraction.

A Labor Department report may show jobless claims rose to 365,000 last week from 361,000 a week earlier, according to the median forecast of 45 economists in a Bloomberg News survey.

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