HOPES of a meaningful rebound by the UK economy in the third quarter, following a dive in output in the three months to June, took an early knock yesterday when a survey signalled soft July retail sales.
And UK retailers do not appear confident the Olympic Games will boost their sales.
The latest monthly distributive trades survey, from the Confederation of British Industry, revealed a much sharper-than-expected slowdown in year-on-year growth in sales volumes on the CBI's measure.
While 44% of retailers surveyed between June 26 and July 17 reported sales volumes were higher than at the same time last year, 33% said they were lower. The net 11% reporting a year-on-year rise in sales was down sharply from a balance of 42% which had reported that sales last month were higher than in June 2011. June trading was boosted to some extent by the extra bank holiday for the Queen's Diamond Jubilee.
A net 14% of retailers reported in the latest CBI survey that sales volumes were poor for the time of year. This was a deterioration from a net 10% reporting such a position in June.
In spite of hopes of a boost to the high street from the Olympics, only a net 3% of retailers projected a year-on-year rise in sales volumes next month.
In the June survey, a balance of 32% of retailers had predicted that their sales volumes in July would be up year-on-year.
Official data this month showed UK gross domestic product tumbled 0.7% in the second quarter. This was the third straight quarter of contraction, meaning the UK stayed stuck in its double-dip recession.
Howard Archer, chief UK economist at consultancy IHS Global Insight, said: "The July CBI survey was appreciably softer than hoped for, which puts an early dent into hopes that the economy can achieve a decent bounce-back in the third quarter after hugely disappointing GDP contraction ... in the second quarter. The CBI survey suggests that relatively poor weather continued to take a significant toll on retail sales in July, while consumers continued to face pretty difficult conditions."
But he noted better weather since July 17, still saw potential for an Olympics-related sales boost, and said it was "premature to write off retail sales in the third quarter".
Samuel Tombs, UK economist at Capital Economics, sees only a "fleeting and small" net boost to sales from the Olympics, with spending shifted to food and clothing from the likes of household goods purchases and cinema trips. He said the CBI survey "suggests retailers are not at all confident that consumers will loosen their purse strings during the Games".
