Rain pours more woe on retail sector as sales slump

Economists said the steep decline raises fears that the economy will remain stuck in recession.

April, May and June proved to be one of the wettest quarters in decades and retail sales volumes fell 0.7 per cent, the sharpest fall since the first quarter of 2010.

The Office for National Statistics said retail sales volumes rose by just 0.1 per cent on the month to give an annual rise of 1.6 per cent – well below economists’ forecasts for monthly and annual rises of 0.6 per cent and 2.4 per cent respectively.

“The Jubilee appears not to have had a significant impact on retail sales,” the ONS said.

The ONS figures showed a 2.5 per cent jump in clothing sales volumes in June, but this was down to shoppers taking advantage of early bargains

Food sales were down 0.7 per cent on the month as people put their barbecues back in the shed.

Economist Howard Archer, at IHS Global Insight, said: “Retail sales disappointed in June as the bad weather impacted and the Queen’s Diamond Jubilee celebrations apparently failed to provide a significant boost.

“Disappointing retail sales in June is another death knell for already low hopes that the economy avoided a third successive quarter of GDP contraction in the second quarter.”

The data showed that department stores saw 0.2 per cent growth in the period, while household goods stores grew by 0.3 per cent.

The ONS reported 1.4 per cent growth in so-called other stores, which covers a broad range of retailers, but was driven by sales in sporting goods and toys.

The total spent in the five-week period to June 30 was £32.7bn, which compares with £26.4bn in the four weeks to May 26.

Internet sales continued to grow, rising 14.3 per cent to £493.3m, and accounted for 8.5 per cent of all retail sales values.

Some economists had expected the Diamond Jubilee to lift retail sales with consumers buying food and drink for street parties, purchasing souvenirs, and taking advantage of the extra bank holiday to go to the shops.

British Retail Consortium’s director general Stephen Robertson said: “The wettest June on record posed a major challenge for retailers.

“These figures confirm our own showing that there was only a mild-boost from the Jubilee, but it did stop June being significantly worse.”

He added that the BRC’s own results showed people splashed out during the few sunny days ahead of the long weekend, but the extra bank holiday made little difference.

“The extent of the rain in recent months has largely drowned demand for summer goods. Retailers with unsold shorts, sandals or garden furniture are now pinning their hopes on a decent late spell of sunshine to clear space for autumn ranges.”

Last week the British Retail Consortium had warned that unseasonably wet weather was sapping shoppers’ appetites. Earlier this week, the ONS reported a big fall in inflation, due to heavy discounting by clothes stores as unseasonably cool and wet weather made shops bring forward seasonal sales.

Samuel Tombs, UK economist at Capital Economics, said: “June’s small rise in UK retail sales volumes suggests that the Queen’s Jubilee provided only a negligible fillip to spending.

“Particularly striking was the 0.7 per cent fall in food sales – a sector which anecdotal evidence suggested had been boosted by the extra public holiday.

“We continue to think that rising unemployment later this year and households’ focus on paying off their debts are likely to prevent a sustained recovery in consumer spending.”

Economists are pinning their hopes on the Olympics, which are expected to lift overall GDP growth by around 0.3 percentage points in the third quarter.

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