LONDON, Aug 21 - British retail sales fell by less than expected in July after the previous month's heat-induced surge, official figures showed on Thursday. The Office for National Statistics said retail sales fell by 0.4 percent on the month in July, leaving them 4.4 percent higher than a year earlier.
Analysts had on average predicted that sales would fall by 0.6 percent after the 1.9 percent monthly gain seen in June. The latest decline is the largest since the beginning of the year but largely reflects the previous month's strong growth. "It seems that people stayed at home in July and using the barbecues they had bought in June," said Richard Batley, an economist at Halifax Bank. The ONS said that one should not read too much into the fall at all, pointing out that three-month growth rates were broadly comparable to those seen in the second half of last year. Still, the figures will provide some relief to Bank of England policymakers who cut interest rates at the start of July to a 48-year low of 3.5 percent before strong consumer data for June became known. Minutes of the Monetary Policy Committee's August meeting published on Wednesday showed the rate chiefs had been surprised by June's retail sales data but overall did not think buoyant consumer spending would continue.
The minutes also warned, however, that at some stage the current expansionary monetary policy stance would have to be moderated. Financial markets, already pricing in an interest rate hike by the end of the year, showed little reaction to the smaller-than-expected decline in retail sales. The ONS said almost all categories of retail sales fell in July apart from household goods which showed a gain of 0.5 percent on the month, perhaps reflecting evidence of some revival in the housing market or consumers stocking up on fans and other cooling equipment. The retail sales deflator, an indicator of price pressures on the high street, rose to an annual rate of 0.4 percent from 0.3 percent in June, its strongest rate since February 2002. Inflation data published last week showed that clothing and footwear retailers in particular did not cut their prices as much last month as they usually do in July.//