11 July 2007, 15:41 PM
  • The release of June's retail sales figures by the British Retail Consortium (BRC) showed that, despite a three percent increase compared to the same period last year, the sales of food products have been aversely affected by last month's bad weather.

Kevin Hawkins, director general for the BRC, says, “Higher than expected overall growth has been achieved by heavy discounting of non-food goods, which has tempted consumers to bring forward major purchases in anticipation of more rate rises. Non-food figures were also boosted by the comparison with relatively weak growth a year ago. This sales growth has outweighed the slowdown in categories such as clothing, DIY and food, which were badly hit by June’s poor weather.”

Helen Dickinson, head of retail for KPMG, adds, “Given comments by many retailers over the past few weeks, these may appear a slightly surprising set of results. But, they mask a complete reversal of the trend prevalent for many months – food and drink was not the driving force behind them. This sector had strong comparatives to beat given the boost to sales last year during the football World Cup – and hence was one of the worst performing ones in June this 2007.”

It is also noted that the recent increase in interest rate is starting to affect consumer confidence. With people being more cautious about making major purchases. However, shoppers are still enjoying heavy discounts to buy now in anticipation of a further rate rise.

“Few people were surprised by last week’s decision by the Monetary Policy Committee of the Bank of England to raise interest rates by a further quarter of one percentage point,” explains Dr Gavin Cameron, macroeconomics lecturer for Oxford University. “Inflation itself fell again in May, and it seems less likely that the Governor of the Bank will have to write a letter to the new Chancellor of the Exchequer at some point this year. Despite this, most forecasters have recently revised up their inflation expectations, while holding their output expectations steady for this year and next.”