The British pound rose against the dollar Thursday after official figures showed United Kingdom’s retail sales beat expectations in July, despite growth slowing as consumers tightened their belts.
The currency climbed 0.3 per cent against the euro to €1.0991 as figures showed retail sales excluding fuel had risen 1.5 per cent in the year to July, compared with expectations of 1.3 per cent. However, that was a dive on the previous month, when growth was 2.8 percent.
However, growth in retail sales including fuel fell to 1.3 per cent in the year to July, missing expectations of 1.4 per cent, as the falling price of oil continued to have a dampening effect on inflation.
The cost of petrol and diesel was cited by the UK Office for National Statistics (ONS) as one of July’s main deflationary factors when it said earlier this week the consumer prices index stuck at 2.6 per cent last month.
However, strong food sales more than offset that, with sales climbing two per cent compared with June, while fuel fell 2.2 per cent. Sales of clothing and footwear and household goods also climbed in July, rising 0.9 per cent and 1.3 per cent respectively on the month before.
“The underlying trend at the beginning of 2017 showed a relatively subdued picture in retail sales,” said Ole Black, a senior statistician at the Office for National Statistics.
“While the overall growth is the same as in June, trends in growth in different sectors are proving quite volatile.”
The figures confirm data published last week by the British Retail Consortium (BRC) which suggested retail sales had edged up 0.9 per cent year-on-year in July, but that growth was down from 1.1 per cent the year before.
Ben Brettell, the senior economist at Hargreaves Lansdown, pointed out the although household finances are being increasingly squeezed, consumer spending has remained surprisingly strong.
“Despite inflation coming in lower than expected on Tuesday, wages are still falling in real terms, squeezing household budgets.
“The UK consumer is extraordinarily resilient. Spending has defied expectations of a slowdown since the Brexit referendum and currently seems to be holding up despite weak wage growth and above-target inflation. This could bode well for economic growth – the UK economy is heavily reliant on the consumer, and economists had expected falling real incomes to eventually translate into weak retail sales.
“If this fails to materialise the economy could see a stronger second half to the year – though there are also growing concerns over the level of household debt, which is fuelling continued consumption in the absence of rising real wages.”