LONDON (Reuters) – British retail sales plunged this month at the fastest annual pace in 10 years, according to figures that reflect unusually strong sales a year ago but add to questions about the economy’s momentum in the second quarter.
The Confederation of British Industry’s monthly retail sales balance fell to -42 from -27 in May, below all forecasts in a Reuters poll that had pointed to an improved reading of -10.
The CBI said the sharp fall should be taken with a pinch of salt, given the survey asked retailers to compare sales with a year ago when hot weather and England’s unexpectedly strong showing in the men’s soccer World Cup boosted sales.
Nonetheless, the survey echoed other data that have suggested the economy has slowed sharply in the second quarter after strong growth in early 2019 was fueled by companies stockpiling in advance of the original Brexit deadline in March.
Until now, consumers have largely taken Brexit in their stride, helped by stable inflation and stronger growth in wages. But official data last week showed cold weather in May prompted the biggest drop in retail sales this year.
“This looks to be a poor CBI distributive sales survey for June, it heightens belief that consumer spending has been markedly softer in the second quarter,” economist Howard Archer from the EY ITEM Club consultancy said. “Indeed, we suspect that GDP may well contract slightly in the second quarter.”
Other economists said the CBI survey has been volatile and this month’s sample size of 45 retailers was smaller than usual.
“The decline in the reported sales balance to its lowest level since March 2009 is not a convincing sign of an emerging consumer downturn,” Samuel Tombs from Pantheon Economics consultancy said.
Still, the survey’s gauge of expected sales for July fell to -11 from +7 for June, marking its lowest level since August 2016.
(Reporting by Andy Bruce; Editing by William Schomberg/Mark Heinrich)