British retail sales staged a more subdued than expected recovery in July after two months of declining volumes, suggesting that consumer spending growth may be on the wane, official figures showed today.
The Office for National Statistics(ONS) said seasonally adjusted retail sales volumes rose 0.3 per cent in July to stand 4.5 per cent higher than a year ago, the worst annual rate for 18 months.
"This does indicate to us that the slowdown in consumer spending is genuine.... This is certainly not an upbeat report," Mr George Buckley, UK economist at Deutsche Bank in London, said.
Economists had forecast a 0.6 per cent month-on-month rise and a 4.7 per cent annual increase. Sales volumes fell a revised 0.4 per cent in June and 0.6 per cent in May - the first back-to-back fall for three-and-a-half years.
The latest retail sales data meant that sales volumes have increased just 0.5 per cent in the latest three months compared with the previous three month period. This suggested that underlying retail sales growth had slowed, the ONS said.
They have also raised concern that British consumers, long the driving force in Europe's second largest economy, have begun to tighten their belts due to tumbling stock markets and growing uncertainty over the global economy.
The retail figures are likely to be studied carefully by the Bank of England, which is being tipped by many economists to lower its benchmark interest rate below the current 38-year low of 4 per cent in the coming months.
However, the ONS urged caution in interpreting the data, some of which may have been distorted by the Jubilee bank holiday in June.
The retail sales deflator - a measure of High Street inflation - was -1 per cent year-on-year in July, compared with -2 per cent in June. It was the fourth successive month of falling prices, underscoring the weak inflationary pressures in the economy and fierce High Street competition.