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UK retail sales fall short of expectations

U.K. retail sales rose very modestly in June, reversing the drop seen in May but falling short of expectations, official data showed.

Retail sales volume in June including fuel was up 0.1 percent from the month before and up 3.6 percent from the same time last year, according to the Office for National Statistics (ONS). This was slightly weaker than the 0.3 percent and 3.9 percent that economists forecast in a Reuters poll.

Daly and Newton | Stone | Getty Images

The second quarter of 2014 saw U.K. retail sales grow 4.5 percent from the same period in 2013, the highest calendar quarter growth in 10 years.

The figures come as the U.K. economy continues to grow and the Bank of England (BoE) considers when to raise interest rates from their historically low levels. BoE governor Mark Carney -- dubbed the "unreliable boyfriend" -- has been accused of sending out mixed signals over the exact timing of the rate hike. On Wednesday the Canadian-born banker expressed fears that an increase in interest rates could damage the U.K.'s recovery and cause households to cut spending.

"History shows that the British people do everything they can to pay their mortgages," Carney said at a speech in Glasgow, Scotland.

"That means cutting back deeply on expenditures when the unexpected happens. If a lot of people are highly indebted, that could tip the economy into recession."

All sectors showed increases in the quantity bought year-on-year for the first time since March 2012.

The amount spend in June in the retail industry was up 0.8 percent compared to may May and 3.5 percent from the same month last year, but spending online fell 0.1 percent from the month before.

Following four months of disinflation, the average price of goods sold in June remained flat. However, the price of textile, footwear and clothing store goods saw prices rise 2 percent year-on-year.

Sterling fell on the weaker than expected retail sales. But analysts said the softness in the data was temporary.

"The figures aren't as bad as they look at first sight. There were a couple of adverse effects that will prove to be temporary," Samuel Tombs, U.K. economist at Capital Economics, told CNBC in a phone interview.

"First you had the World Cup in June and past experiences show that sales will fall as consumers stay inside and forgo shopping opportunities. The summer sales are also slightly later and consumers are holding off on spending. We will see stronger growth in future month and June's figure are not a good indication of underlying consumer recovery."

The ONS figures also follow data released on Wednesday by the business lobbying body CBI which showed the hot U.K. summer provided a boost to retail sales. Nearly half of all retailers surveyed (46 percent) said sales volumes grew in the year to July, and 51 percent expect a further bump to sales next month.

U.K. second quarter GDP figures will be released on Friday.

- By CNBC's Arjun Kharpal

Contact Economy

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