- Seven month low in CBI survey findings
- Strong growth in April dipped in May and crashed in June
- Economists read across to BoE rate rise timing
New retail sales figures have blotted the UK economy's copybook, as retail sales growth slowed badly in June, dampening expectations for a potential Bank of England rate rise.
After a succession of good news on the economy, the CBI Distributive Trades Survey showed the balance of retailers that reported sales were up year-on-year crashed to a seven-month low of +4% in June from +16% in May and +30% in April.
The CBI said a fall in clothing and food sales contributed to a disappointing month on the high street, and cautioned that slow wage growth continued to weigh on consumer sentiment.
Barry Williams, Chair of the CBI Distributive Trades Survey Panel and supermarket Asda's Chief Merchandising Officer for Food, said: "Whilst it seems that hopes that retail spending would be boosted by a strong performance by England at the World Cup were as over-ambitious as aspirations for a good performance, I'm reassured that consumer confidence is still on the up, as household budgets are being bolstered by falling inflation."
"However, whilst discretionary income is still on the rise, slow wage growth continues to weigh on how much consumers are willing to go out and spend."
Economist Howard Archer of IHS said there could be wider implications from the retail data update.
"With Mark Carney stressing that the Bank of England's decision on when to start raising interest rates will be data driven, the loss of momentum in retail sales reported by the CBI is likely to dampen expectations of any action before the end of 2014," he said.
Archer stressed that "not too much should be read" into the survey, as retailers remained relatively upbeat over prospects for a renewed push in July, with a balance of +17% expecting sales to be up year-on-year.
"Even so, the loss of momentum in retail sales in June indicated by the CBI does raise question marks as to how strong consumer spending can be until earnings growth picks up appreciably."
Among the retail sub-sectors, the survey found clothing sales fell for the first time since January and annual sales growth in grocers slowed for the second month running.
On the upside, internet sales volumes in the retail sector rose solidly, but remained below the long-run average for a second consecutive month.
Furthermore, volumes in motor trades and wholesale sectors grew robustly, although wholesale growth was slower than expected. Both sectors expect sales to increase robustly in the year to July, the survey reported.
Some correction in sales was always likely in May after they were lifted in April by the later Easter this year, but it had been expected that retail sales would pick up in June with the World Cup helping matters.