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U.K. Retail Sales Rise Less Than Forecast as Clothing Slides

U.K. Retail Sales Rise Less Than Forecast on Drop in Clothing
An employee pushes a rail of women's fashion clothing inside a department store in Milton Keynes. A gauge of annual sales growth increased in July, as consumers boosted spending on food, clothing and footwear, the Confederation of British Industry said yesterday. Photographer: Jason Alden/Bloomberg

U.K. retail sales rose less than economists forecast in June as hot weather led clothing stores to delay summer clearances.

Sales volumes including auto fuel increased 0.1 percent from May, the Office for National Statistics said today in London. The median forecast of 21 economists was for an increase of 0.3 percent. Clothing slid 2 percent, with prices increasing the most for any June on record.

Anecdotal evidence suggests “sales in clothing stores have been delayed as consumers have continued to buy clothing from the summer ranges as the good weather continues,” the ONS said in the report. This allowed retailers to increase prices in a month that usually sees them discounting, the statistics office said.

The pound fell 0.2 percent after the data to $1.7011 at 11:04 a.m. London time. Sterling depreciated 0.3 percent to 79.23 pence per euro.

Retail sales in the second quarter rose 1.6 percent from the first, a 16th consecutive three-monthly increase and the longest period of growth since 2007. From the same three months a year earlier, sales advanced 4.5 percent, the most for a calendar quarter since December 2004.

The quarterly data add to evidence that the recovery sustained momentum in the three months through June. Gross domestic product probably expanded 0.8 percent in that period, matching the first quarter’s growth, according to economists in a Bloomberg survey. The ONS will publish the GDP report tomorrow.

‘Cruising’ Economy

“Strong second quarter retail sales point to another solid GDP growth figure,” said Rob Wood, chief U.K. economist at Berenberg Bank who previously worked at the BOE. “The U.K. is now cruising at above-trend growth rates, so the data are no longer universally surprising on the upside. But equally, they are not surprising much on the downside either.”

Bank of England Governor Mark Carney said yesterday that while rates will need to rise from a record low as the economy normalizes, officials have “no pre-set course” and will be guided by the data. Futures contracts show investors are betting the key rate will rise 25 basis points in February.

From a year earlier, retail sales increased 3.6 percent in June. Excluding auto fuel, retail sales decreased 0.1 percent in June from May and were up 4 percent on the year.

The ONS said prices measured by the deflator rose 0.1 percent in June from May, with prices of textiles, clothing and footwear increasing 0.5 percent. Prices of clothes, which usually fall in June on discounting, rose the most since records began in 1986, the ONS said. They last increased in the month of June in 2007.

Other reports suggest expansion in retailing will continue. A gauge of annual sales growth increased in July, as consumers boosted spending on food, clothing and footwear, the Confederation of British Industry said yesterday. Retailers see business strengthening further in August, the business lobby group said.

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