Shock fall in June retail sales

Retail sales shrunk in June, down 0.5 per cent from May, according to the Office for National Statistics (ONS).

The market had expected a 0.2 per cent rise.

The ONS said that the World Cup and heat wave had kept shoppers away from the high street in June, but this followed a strong April and May.

Sales growth of 2.1 per cent over the April-to-June quarter was the biggest quarterly rise since 2004, according to economics consultancy Capital Economics, suggesting that an August interest rate rise was “more likely than not”.

In a note, Capital Economics said: “Of course, part of Q2’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.”

Phil Mullis, partner and head of UK accountancy firm Wilkins Kennedy, was more cautious, arguing that people were still feeling the squeeze.

“That might be why some of the latest retail sales figures show a boost in some areas, such as grocery, and not others. Simply because people are choosing more wisely about where they spend any spare cash,” he said.

“We hope that we will have seen growth during July from the knockout stages of the World Cup – particularly as consumers enthusiastically backed England through the final stages. Let’s hope this will have had a positive impact on the figures, but more needs to be done to ensure any growth is sustainable.”