"Concern over a potential rise in interest rates is having a dampening effect on retail sales"
- David McCorquodale, head of retail at accountants KPMG
Growth of retail sales in the U.K. slowed in June to one of the weakest pace in three years amid fears of higher interest rates. The British Retail Consortium said total retail spending rose 0.6% in June for the same period a year ago, the lowest growth rate since May 2011. The slowdown in sales was driven by weaker demand for big-ticket household items and a decline in food sales as consumers shopped around for bargains at discounters and major supermarkets. Consumer spending has been the major contributor to the U.K.'s unexpectedly robust economic recovery over the past year; however, in May Britain's central bank said it projected the growth rate to decline slightly in the second half of the year. According to the BRC, second-quarter sales growth was sustainable overall, increasing 2.6%, the fastest growth pace for a calendar quarter since Q3 of last year. June saw rising speculation that the BoE would raise interest rates form the historic low of 0.5% later this year. Although the central bank stressed that any move will be gradual and will be to below the pre-crisis levels, households have become increasingly concerned about interest rate hike.
The Office for National Statistics is due to publish June retail sales data on July 24 that covers a broader range of stores than the BRC data, which focuses on larger chains.
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