UK retail sales grow modestly as consumers remain cautious

By PAN PYLAS Markets Associated Press

Retail sales in Britain, a key component of the economy, rose by a solid if unspectacular 0.3 percent in July from the month before as consumers remain constrained by falling real incomes.

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The rate of increase reported by the Office for National Statistics was unchanged from June's rise, which was downwardly revised from 0.6 percent. However, it was slightly ahead of market expectations for a 0.2 percent rise.

The statistics agency said Thursday that strong food sales were behind the monthly increase as all the other main sectors posted falls.

Senior statistician Ole Black said trends in growth in different sectors are "proving quite volatile."

Retail sales have been sluggish this year as consumers have become cautious amid a rise in consumer prices. That's evident in the fact that retail sales in the three months to July were up only 0.6 percent from the previous three-month period, against the 1.5 percent recorded in June.

Retailers will be hoping that a pick-up in wages and signs that inflation may have peaked will soon start to boost sales. Real income growth could help shore up the economy, which has slowed markedly this year, in the choppy Brexit waters ahead. Britain is due to leave the European Union by March 2019 and there are worries the economy could stutter through then as consumers and businesses hold off from making big spending decisions amid the uncertainty.

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Oliver Kolodseike, senior economist at the Centre for Economics and Business Research, thinks there's little chance real earnings will rebound this year.

"The squeeze on household finances is therefore set to continue," he said. "Consumer spending has propelled the U.K. economy forward in recent years, but this trend will come to an end in 2017 as falling real wages will continue to squeeze household incomes and thereby depress retail sales volumes."

Kingfisher PLC, owner of the DIY retail firm B&Q, is one firm that will be hoping to see a turnaround. It reported a 1.9 percent fall in same-store sales in the three months through July, largely because of weakness in its British operations, an update which saw its share price slump 5 percent in morning trading in London.