Analyst expectations had been for a 0.2% rise, but increased spending on food and household goods offset weakness in other sectors. Indeed, having fallen 1.1% in June, food sales jumped 1.5% in July.
However, as all other sectors, bar food and household goods, saw a decline in sales in July, retail sales for the three-month period to July slowed to 0.6%, down from the 1.5% recorded between April and June.
“Whilst the overall growth is the same as in June, trends in growth in different sectors are proving quite volatile,” said Ole Black, a senior statistician at the ONS.
Ben Brettell, a senior economist at Hargreaves Lansdown, said that while inflation came in lower than expected earlier this week, wages are still falling which is squeezing household budgets. As such he said retail sales data is being monitored closely as economists search for signs that consumer spending is coming under pressure.
“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,” he said.
Given the UK economy is heavily reliant on the consumer, and that economists had expected falling real incomes to eventually translate into weak retail sales, Brettell said this could bode well for economic growth.
“If this (falling retail sales) fails to materialise the economy could see a stronger rebound second half to the year – though there are growing concerns over the level of household debt, which is fueling continued consumption in the absence of rising real wages.”
Market reaction to this morning’s data was muted, with little change in both sterling and the FTSE.
