Due to exceptionally hot weather and a comeback in food sales after King Charles’ coronation disrupted spending in May, British retail sales increased quicker than anticipated in June despite ongoing high inflation, official numbers indicated on Friday.

While the highest rate of any significant economy’s inflation, at about 8%, continues to be a problem for many people, some economists believe that a drop in energy costs starting on July 1 will increase disposable income.

According to the Office for National Statistics (ONS), sales volumes increased by 0.7% in June compared to May, exceeding the 0.2% increase predicted by experts in a Reuters survey.

Sales decreased by 1.0% from a year earlier, exceeding expectations of a 1.5% dip.

The ONS reported that in addition to the recovery in food sales, department stores and furnishing retailers also had a successful month.

Due to an additional public holiday to commemorate King Charles’ coronation, households may have spent more money at restaurants during May than they did at food merchants.

The hottest June on record in Britain occurred last month, helping department stores and supermarkets do well. Only retailers selling apparel and shoes reported reduced sales last month.

After the data, the value of the pound against the dollar increased by almost a quarter of a cent before declining.

However, the longer-term outlook is less promising, as consumers are receiving significantly less value for their money than they did three years ago, and overall spending has stagnated along with the economy.

Consumer confidence decreased in July for the first time since January, according to market research firm GfK.

Despite the fact that consumers spent 17.9% more money at stores last month than they had immediately before the COVID-19 epidemic, the ONS reported that consumers purchased 0.2% less items overall.

According to ONS data released on Wednesday, food inflation has been particularly strong, with prices in June 17.4% higher than they were a year ago and just slightly lower than the 45-year peak of 19.2% reached in March.

Following accusations of profiteering, Britain’s competition commissioner stated on Thursday that high prices were not the result of a lack of supermarket competition.

According to figures released on Friday, retail prices, excluding gasoline, have fallen for the first time monthly since January 2022, shortly before Russia’s invasion of Ukraine increased inflationary pressures in Britain.

Despite the effects of increasing Bank of England interest rates, several economists now anticipate a comeback in retail sales. The BoE increased interest rates to 5% last month, and it is anticipated that it will do so once more in August, to 5.25%.

“Overall, we expect retail sales volumes to moderately tick up over the rest of the year, but a greater rebound will have to wait until the economy improves more broadly, which probably won’t be until the second half of 2024,” said Thomas Pugh, an economist at accountants RSM UK.

There were other Less optimistic analysts as well.

“With the full drag on activity from higher interest rates yet to be felt, we still think the economy will tip into recession in the second half of this year,” said Ashley Webb at Capital Economics.

(Adapted from StreetInsider.com)

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