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World Cup fails to lift UK retail sales in June Pound drops below $1.30 as June retail sales fall
(35 minutes later)
The hunger for barbeques and World Cup-fever failed to lift retail sales in June as shoppers stayed away from the High Street. The pound has dipped below $1.30 after figures revealed that retail sales dropped in June, confounding expectations of an increase.
The Office for National Statistics said sales fell 0.5% between May and June, below expectations of a 0.2% rise. Sterling slipped against the US dollar to $1.2988 immediately following the release showing that retail sales dropped by 0.5% between May and June.
The pound fell against the dollar in response, dipping below $1.30. Economists had forecast a rise of 0.2%.
ONS senior statistician Rhian Murphy said: "Consumers stayed away from stores and instead enjoyed the World Cup and the heatwave." However, while the World Cup and the heatwave boosted sales of food and drink, they also kept shoppers away from the High Street.
Keith Richardson, managing director retail sector at Lloyds Bank Commercial Banking, said: "While the World Cup definitely got shoppers spending, these figures don't cover the sudden rush of optimism that came with England's progress beyond the initial group stage. The pound quickly regained some ground to trade at $1.3008, but it remains around the 10-month low it reached on Tuesday following lower than expected inflation for June.
"What they do show is how challenging the retail sector is at the moment. Even the longest heatwave that many shoppers can remember hasn't been enough to persuade consumers to really open their wallets." The last time sterling fell below $1.30 was on 4 September last year.
In the year to June, retail sales rose by 2.9%, although that was a slowdown from the 4.1% annual increase recorded in May. The figures from the Office for National Statistics also showed that retail sales rose by 2.9% in the year to June, a slowdown from the 4.1% annual increase recorded in May and below forecasts of 3.5%.
However, in the April-to-June quarter retail sales increased by 2.1% - the biggest quarterly rise in 14 years. However, Samuel Tombs, chief UK economist at Pantheon Economics said the data would not "undermine the [Bank of England] Monetary Policy Committee's judgement that the economy rebounded in the second quarter".
In the April-to-June quarter retail sales increased by 2.1% - the biggest quarterly rise in 14 years.
The Bank of England had been expected to raise the interest rate in August, however following the most recent inflation figures, economists were divided on whether it would go ahead with the move.
ONS senior statistician, Rhian Murphy said: "Retail sales grew strongly across the three months to June 2018 as the warm weather encouraged shoppers to buy food and drink for their BBQs.
"However, in June retail sales actually fell back slightly, with continued growth in food sales offset by declining spending in many other shops as consumers stayed away from stores and instead enjoyed the World Cup and the heatwave."
Ruth Gregory, senior UK economist at Capital Economics, said: "Some of the second-quarter's strength reflects temporary factors, such as a boost from the warm weather and the Royal Wedding celebrations.Ruth Gregory, senior UK economist at Capital Economics, said: "Some of the second-quarter's strength reflects temporary factors, such as a boost from the warm weather and the Royal Wedding celebrations.
"Crucially, though, the big constraint on spending - namely the squeeze on real wages from high inflation - has eased.""Crucially, though, the big constraint on spending - namely the squeeze on real wages from high inflation - has eased."
Economic data out earlier this week showed that while wage growth has slowed to 2.7%, it remains above inflation, which stayed at 2.4% in June for the third consecutive month. Economic data out earlier this week showed that while wage growth has slowed to 2.7%, it remains above inflation.
Ms Gregory said: "While this week's unexpectedly-weak inflation figures have made the outlook for an interest rate rise in August rather less clear-cut, the recovery in the consumer sector supports our view that a hike is still more likely than not."