-Howards Archer, HIS Global Insight economist
UK retail sales saw an unexpected decline in June amid decrease in sales of food, other household goods, and other goods. The retail sales saw a 0.2% decline for the reported period compared to 0.4% increase expected by economists, which is the first time sales growth has contracted since March this year. However, in the quarter ending in June, sales growth rose 0.7%, the 28th straight quarterly increase. Moreover, amount of money spent in the retail industry in June surged by 0.9% compared with the same period in 2014, while declined 0.1% compared to May 2015. Decline was caused, as spending by British consumers on furniture and appliances dropped 0.9%, while on food by 0.3%.
Despite the disappointing June figures, the outlook by investors and economists remains positive due to appreciating Sterling, low inflation rate, and falling oil prices. These factors will boost disposable income for consumers to spend on goods, thus further underpinning economic growth and recovery. Nonetheless, growth of retail sales will play a key role in the BoE's decision on when to hike interest rates. Last week, the central bank's governor Marc Carney hinted a possible rate hike by the end of 2015. However, the timeline for this important decision could be impacted by further disappointing sales growth figures in the following months.
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