UK Retail Sales Slide by 1.2% in June Delivering BoE Policy Uncertainty

June UK Retail Sales Decline

On Friday, July 19, UK retail sales data drew investor interest.

UK retail sales declined by 1.2% month-on-month in June after surging 2.9% in May. Economists predicted retail sales to fall by 0.4% in June.

Additionally, UK retail sales ex-fuel fell by 1.5% month-on-month in June after a 2.9% rise in May. Economists expected UK retail sales ex-fuel to fall by 0.5% in June.

According to the Office for National Statistics,

• Department store sales tumbled 3.4% in June (May: +1.7%).
• Non-food store sales fell by 2.1% (May: +3.3%).
• Food store sales declined by 1.1%.
• Automotive fuel sales increased by 2.2%.
• Retail sales volumes declined by 0.1% in Q2 2024 when compared with Q1 2024.

Retailers attributed the slide in retail sales to poor weather conditions, the UK General Election, and low foot traffic.

Bank of England Monetary Policy Implications

Retail sales fell in June, with weather conditions continuing to influence consumer spending trends.

The retail sales figures could raise investor bets on an August Bank of England interest rate cut. Lower consumer spending could ease demand-driven inflation and support a more dovish BoE rate path.

However, UK inflation and wage growth numbers suggested the BoE must wait for more data points. Average earnings (excl. bonus) eased from 6.0% in April to 5.7% in May.

Unlimited Chief Investment Officer Bob Elliot commented on inflation and wage growth, stating,

“The UK is experiencing an uptick in growth and stubbornly high inflation driven by elevated wage growth. Not the time to start easing and another sign of caution for DW central bankers. Core CPI stabilizing around 3.5%, way over the BoE mandate.”

GBP/USD Reaction to the UK Retail Sales Numbers

Before the UK retail sales report, the GBP/USD climbed to a high of $1.29508 before falling to a low of $1.29339.

However, in response to the retail sales report, the GBP/USD fell from $1.29403 to a low of $1.29295.

On Friday, July 19, the GBP/USD was down 0.11% to $1.29301.

Up Next

Later in the session on Friday, investors should monitor FOMC Member speeches. Voting Members Raphael Bostic and John Williams are on the calendar to speak.

With investors cementing bets on a September Fed rate cut, views on July and December rate cuts could move the dial.