UK retail sales volumes rise as expected

The underlying volume of UK retail sales in July rose 0.4% on the preceding month, as predicted, which was an improvement on the previous month's revised 0.3% rise, although total sales including from petrol stations fell short of expectations.

The Office of National Statistics said the total volume of retail sales including automobile fuel rose by a monthly 0.1% in July, below the consensus expectation of a 0.4% rise and only just reversing June’s 0.1% fall.

Moreover, the three-month on three-month average growth rate fell from 0.7% in June to 0.5% in July.

The value of spending in the retail industry increased by 1.0% year on year in July but decreased by 0.2% compared with June 2015, as price disinflation continued with average store prices down 3.0% compared with July 2014.

On a yearly basis, ONS retail sales were up 4.3%, again in line with expectations and ahead of June's 4.1% increase.

The year-on-year data showed growth for the 28th consecutive month, the longest period of sustained year-on-year growth since May 2008.

The ONS said the underlying pattern in the data, as suggested by the three-month on three-month movement in volumes, showed growth for the 29th consecutive month, increasing by 0.5%. This is the longest period of sustained growth since consistent records began in June 1996.

"It’s good news for Chancellor George Osborne who’ll now be able to push the stagnant wage growth figures and unemployment rises into the long grass for the time being," said Dennis de Jong, managing director at UFX.com.

Paul Hollingsworth at Capital Economics said missed volume forecasts were "nothing to worry about".

"July’s retail sales figures showed that the pace of spending growth on the high street moderated at the beginning of Q3. But we doubt that this signals a more widespread slowdown in the consumer recovery."

He said part of the weakness could be explained by the decline in petrol spending, possibly reflecting the fact that petrol retailers have so far failed to pass on the cost savings from the fall in the oil price to petrol prices at the pumps.

"What’s more, spending on clothing also fell on the month, which is probably a result of the earlier start to the summer sales this year boosting spending in June instead."

Economists believe prospects for retail spending remain bright, with real pay rising strongly, unemployment still low and falling oil prices likely to results in forthcoming cuts to petrol prices.