U.K. Retail Sales Drop as Food Slump Offsets World Cup: Economy

U.K. retail sales fell for the first time in four months in May as a World Cup boost failed to offset a slump in demand at food stores.

Sales including auto fuel declined 0.5 percent from April, the Office for National Statistics said today in London. That matched the median forecast of economists in a Bloomberg News survey. Food sales slid 2.4 percent after surging the previous month during the Easter holiday. Sales at other retailers jumped 2.2 percent, helped by demand for replica football jerseys before the World Cup tournament that started this month.

The monthly decline may not alter the upbeat view of Britain’s economy, with the data showing three-month sales rose an annual 4.9 percent, the most in almost a decade. The Bank of England said yesterday the recovery is becoming more sustainable and the economy is starting to return to normal.

Today’s data show “trend growth remained strong,” said Armela Mancellari, an economist at Barclays Plc. “The upbeat prints in retail sales are likely to continue. Strong job creation and higher consumer confidence, in part due to wealth effects from the recovery in the property market, seem to be supporting household revenues and spending.”

Excluding auto fuel, retail sales declined 0.5 percent in May from April and were up 4.7 percent from a year earlier. In the latest three months, the volume of sales rose 1.3 percent compared with the previous three months, a 15th consecutive increase.

Rate Bets

An improving economy, coupled with comments from BOE officials including Governor Mark Carney, have fueled speculation about when borrowing costs will rise from a record low. Investors increased their bets that a rate increase may come as soon as this year after Carney said last week that tightening might start earlier than anticipated.

Easing inflation may help maintain the momentum in consumer spending. Data this week showed price growth slowed to 1.5 percent in May. While consumer spending bolstered the U.K. recovery last year, BOE Monetary Policy Committee member designate Kristin Forbes said yesterday that “this trend cannot be sustained without presenting major risks.”

Today’s data showed more evidence of discounting at retailers. The ONS said prices measured by the annual deflator, a gauge of changes in shop prices, fell 0.7 percent in May, the most since September 2009.

Prices declined 0.1 percent in May from April, with food prices slumping 0.4 percent, the biggest drop in almost a year amid a price war between supermarkets.

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