U.K. Retail Sales Increase as Discounts Spur Consumer Demand

U.K. retail sales rose for a second month in June as discounts at department stores drove demand for clothes and electrical products.

Sales including fuel rose 0.2 percent from May, when they surged 2.1 percent, the Office for National Statistics said today in London. That’s the first consecutive increase since July 2012. The median forecast of 20 economists in a Bloomberg News survey was for a 0.3 percent gain. From a year earlier, sales increased 2.2 percent.

The report adds to signs that Britain’s economy is recovering after surveys of services, manufacturing and construction all strengthened last month. At the same time, consumer confidence is rising and unemployment data yesterday showed jobless claims fell the most in three years in June.

“This rise in retail sales probably has some legs,” said David Tinsley, an economist at BNP Paribas SA in London and a former central bank official. “Consumer spending broadly can help the current run-rate of GDP growth move higher.”

The pound pared its decline against the dollar after the data and was trading at $1.5198 as of 10:30 a.m. London time, down 0.1 percent from yesterday. The yield on the 10-year U.K. government bond fell 3 basis points to 2.26 percent.

GDP Boost

In the second quarter, retail sales rose 0.9 percent from the previous three months, the statistics office said. Retail sales account for about 5.7 percent of the economy and the second-quarter increase equates to a contribution of 0.1 percentage point to gross domestic product.

The National Institute of Economic and Social Research estimates GDP rose 0.6 percent in the quarter through June. The Bank of England, which left its bond-purchase program unchanged this month, is reviewing how it might use forward guidance as a tool to help bolster the recovery. It will publish the outcome of that review next month.

Excluding fuel, retail sales rose 0.2 percent in June from May and increased 2.1 percent from a year earlier, today’s report showed.

Department-store sales increased 3 percent, the most since March 2012. The ONS said there was an increase in promotions and consumers bought “more clearance items across a range of products, including clothing, electrical items and household goods.”

Food sales fell 0.1 percent in June from the previous month, while textiles, clothing and footwear declined 0.3 percent. In that category, clothes sales were little changed.

‘Strong Start’

The average weekly spend on retailing in June was 6.9 billion pounds ($10.5 billion), according to the ONS. That’s up from 6.8 billion pounds in May and 6.6 billion pounds in June

2012. Sports Direct International Plc said today it has seen a “strong start” to the fiscal year, with “trading ahead of management’s expectations.”

The annual retail-sales deflator, a measure of changes in shop prices, rose to 1.7 percent in June from 1 percent in May, the highest since April 2012, the statistics office said. Excluding auto fuel, the deflator was also 1.7 percent. The deflator on food was 3.4 percent.

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