REFILE-UK retail sales growth slows in August after strong July

Thu Sep 19, 2013 4:37am EDT

LONDON, Sept 19 (Reuters) - British retail sales were surprisingly weak in August as consumers reined in spending, particularly on food, after a July splurge.

Retail sales volumes fell 0.9 percent on the month, wrongfooting economists who had expected a rise of 0.4 percent. The annual rate of growth slowed to 2.1 percent from July's 2-1/2 year high of 3.0 percent.

The previous month's figure was boosted by a heatwave, which lifted sales of barbecue food and outdoor items. July's Royal baby and a string of British sporting successes provided an additional reason to splash out.

Food sales fell 2.7 percent on the month in August, fully reversing July's gain.

Rising house prices, record low mortgage interest rates and signs of economic recovery have given consumer spending a boost in recent months. However, with inflation continuing to outstrip wage growth, economists question whether this rise will be sustainable.

Some of Britain's biggest retailers have sounded a cautious note on the prospects for recovery.

Morrisons, Britain's fourth-biggest grocer, said last week that higher levels of spending in the London area were not indicative of the rest of the country.

Next, the country's No. 2 clothing retailer, sounded similarly downbeat, saying a full-blown recovery would require growth in real earnings, not just borrowing.

New Bank of England Governor Mark Carney has sought to reassure households, as well as businesses and financial markets, that interest rates will not be rising any time soon, potentially encouraging more spending.

The retail sector accounts for just under 6 percent of the British economy.

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