- Samuel Tombs, analyst at Capital Economics
Growth of British annual sales weakened in July, despite a big surge in clothing purchases, the Confederation of British Industry reported. The CBI distributive trades survey's retail sales balance dropped for a second straight month after sliding to the lowest level in five months in May, declining to +21 in July, compared with +29 in the prior month, falling short of economists' forecasts for a modest rise to +30. The outlook for sales in August was even gloomier, with the corresponding gauge declining to a two-year low of +13 from +33. According to the latest official data, retail sales, both including and excluding fuel, decreased 0.2% between May and June. Despite the continuous quarterly growth, total retail sales volumes slowed during the April-June period to 0.7%, down from 0.9% in the first three months of the year. The retail sector and overall domestic consumption in the UK has been considered one of the key drivers for the economy. Expectations for domestic spending in the country have been mixed recently, with some analysts warning it could weaken even further once the Bank of England starts to hike its benchmark interest rate from the record low of 0.5%, given the burden of household debt and rising house prices. A separate report showed net lending to individuals and households rose more than expected in June, reflecting increased demand for credit. The BoE said total net lending to individuals increased by 3.8 billion pounds last month, up from 3.5 billion pounds in April.
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