UK retail sales fall in June, ONS says

UK retail sales fell 0.2% in June compared to month before, data from the Office for National Statistics (ONS) showed, some way off the 0.4% gain that had been expected.

The soft patch was blamed on declining sales on a wide range of goods, predominantly food stores, furniture, sporting equipment, jewellery, household goods stores and petrol stations.

After food's solid growth in May, sales fell 0.3%, with non-food store sales continued their recent contraction, declining by 0.7% compared to May, on top of the 0.4% fall in that month.

The disappointing data saw UK 10-year Gilt yields dip back below 2%.

However, other underlying reading were encouraging. Year-on-year growth estimates continued to show robust growth with a 4.0% increase compared with June 2014.

Also, ONS said June saw the amount spent in the retail industry increase by 0.9% compared with June 2014, but decreased by 0.1% compared with May 2015. Non-seasonally adjusted data show that the average weekly spend in the retail industry was £7.1bn, unchanged from the previous month and the June 2014 figure.

Average store prices, including petrol stations, fell for a twelfth consecutive month, putting the yearly decline at 2.9%.

This still leave the year-on-year growth rate at a pretty robust 4.0%

"This still leave the year-on-year growth rate at a pretty robust 4.0%, however," noted BNP Paribas, with quarterly growth rate also remains solid at 0.7%.

"With wages increasing faster than inflation, improvements in purchasing power should translate into renewed buoyancy in the retail sector in the months ahead," the French bank added.

Given the strong recent British Retail Consortium-KPMG survey, the ONS data was "a little disappointing", according to economist Howard Archer at IHS Global Insight. But he said "the underlying trend is still decent and the data are not a body blow to improved second quarter growth hopes".

Despite June’s dip, the prospects for retail sales and consumer spending look bright for the rest of 2015 and beyond

He noted the 0.7% quarter-on-quarter rise to June suggested consumer spending made a healthy contribution to GDP growth, which he expects to have improved to 0.7% quarter-on-quarter from 0.4% in the first quarter.

"Despite June’s dip, the prospects for retail sales and consumer spending look bright for the rest of 2015 and beyond," Archer added, "consumer confidence was at a 15-year high in June, inflation is negligible, earnings growth is improving and employment has risen appreciably overall - despite a relapse in the latest data. Additionally, signs of a pick-up in housing market activity should be supportive to consumer spending through boosting demand for household goods and furnishings."

Online company read-across

Online sales in June increased by 1.4% compared with the month before and 11.4% on the same month last year, to account for 12.4% of all retail sales.

Looking at how companies might be affected, Clive Black at Shore Capital said the crossover between the growth in apparel stores and online retail augurs well for the likes of Boohoo and N Brown.

"Our view is that innovation trends are influencing this growth in online retail. Personalisation continues to be a key evolution for pure-play online businesses; take ASOS, which reported 27% domestic sales growth in the UK for the period up to the end of June 2015."

Reading across other recent data releases, with the restaurant trade having been promising and hotel bookings also strong, he Black said this was "evidence that disposable income is being spent on experiences rather than on the high street".