2019.07.1807:28:00UTC+00UK Retail Sales Recover Unexpectedly In June

UK retail sales recovered unexpectedly in June suggesting that wage growth boosted household spending at the end of the second quarter, data from the Office for National Statistics revealed Thursday.

After falling for two straight months, retail sales volume increased 1 percent month-on-month in June, largely driven by non-food product sales. Sales were forecast to fall 0.3 percent after easing 0.6 percent in May.

Non-food product sales advanced 1.7 percent, while food product sales grew only 0.2 percent.

Likewise, sales excluding auto fuel, expanded 0.9 percent after falling 0.4 percent each in May and April. Economists had forecast a 0.2 percent drop for June.

On a yearly basis, growth in retail sales accelerated to 3.8 percent from 2.2 percent in May. The rate also exceeded the expected rate of 2.6 percent.

Excluding auto fuel, retail sales climbed 3.6 percent after expanding 2 percent in the previous month. Economists had expected an annual growth of 2.6 percent. June's bounce in retail sales has to be viewed in the context of monthly declines in April and May, James Smith, an ING economist, said.

While higher real wages should help spending in the near-term, the effect of Brexit uncertainty makes for a tricky outlook for retailers in the second half of the year, the economist added.

The rebound in retail sales in June was a big relief as it shows that there is some life in household spending yet and suggests that the overall economy may have avoided a contraction in the second quarter, Paul Dales, an economist at Capital Economics, said.

In the second quarter, retail sales increased 0.7 percent driven by all sectors except food and department stores. Nonetheless, the pace of growth eased from 1.6 percent in the three months to May.