LONDON, July 15 (Reuters) - British retail sales growth slowed in June to one of its weakest rates in three years, possibly in response to fears of higher interest rates, industry figures showed on Tuesday, adding to recent lacklustre economic data.
The British Retail Consortium said total retail spending in June was just 0.6 percent higher than a year before, the lowest growth rate since May 2011 if annual volatility caused by the timing of Easter is excluded.
Consumer spending has been a major driver of Britain’s unexpectedly strong economic recovery over the past year, but in May the Bank of England said it expected the rate of growth to fall slightly in the second half of 2014.
Industrial output and the construction sector were weak in May, and services activity growth slowed to a four-month low in June.
The BRC said second-quarter sales growth was robust overall, rising by 2.6 percent, the fastest growth rate for a calendar quarter since the third quarter of last year.
But the figures were flattered by Easter falling in the second quarter this year and the first quarter in 2013, and spending growth slowed towards the end of the quarter, after chalking up annual growth of 2.0 percent in May.
“Concern over a potential rise in interest rates is having a dampening effect on retail sales,” said David McCorquodale, head of retail at accountants KPMG, who sponsor the survey.
“Even sales of home accessories and furniture flatlined, which is surprising given the UK is reportedly in the midst of a housing boom.”
June saw increased speculation that the Bank of England would raise interest rates from their record low 0.5 percent later this year, though the BoE has stressed that any increases will be gradual and will be to below pre-crisis levels.
McCorquodale also blamed England’s early exit from soccer’s World Cup for depressing food and drink sales.
The BRC said the weak spending growth partly reflected a supermarket price war, which contributed to a 1.8 percent fall in high street prices last month, the biggest since at least 2006.
“Consumers continue to benefit from competitive pricing, which may be the cause of softer like-for-like sales in June,” BRC director-general Helen Dickinson said.
Sales on a like-for-like basis - a measure which strips out changes in floor space and is favoured by equity analysts - were 0.8 percent lower on the year, bucking analysts’ expectations for 1.0 percent growth.
Second-quarter food sales fell 2.0 percent on the year, while non-food sales rose 3.6 percent on a like-for-like basis.
The Office for National Statistics publishes June retail sales data on July 24 that covers a broader range of stores than the BRC data, which focuses on larger chains.
In May the ONS reported that retail sales rose by an annual 3.2 percent in value terms, and were 3.9 percent higher when the effect of falling prices was factored in. (Reporting by David Milliken; Editing by Catherine Evans)