UK retail sales growth slows in July, non-food sales fall - BRC

LONDON (Reuters) - British retail sales grew more slowly in July, data published on Tuesday showed, as shoppers cut back on non-essential spending and budgeted for the higher price of food following the Brexit vote.

UK retail sales increased by an annual 0.9 percent on a like-for-like basis, which strips out changes in store size, the British Retail Consortium said.

That was down from growth of 1.2 percent in June - the highest non-Easter reading of the year thanks to good weather.

Total sales in July slowed to show a 1.4 percent rise, in line with the 12-month average.

While better than the falling sales seen in much of this year, July’s reading was a latest sign that the engine of the British economy - consumer spending - is losing steam.

The BRC said the 2.3 percent growth in food sales on a like-for-like basis between May and July was mainly driven by rising prices, while non-food sales shrank by 0.7 percent.

This was the weakest performance for both since the January-March period.

A sharp depreciation in sterling since the Brexit vote in June 2016, combined with stagnant wages, has put pressure on households as essentials like food have become more costly.

The trend has pushed consumer borrowing up while confidence levels have fallen along with spending on items like cars and the number of people seeking mortgages to buy homes.

“We can expect food to continue making the running for sales growth for the time being, although driven more by price than volume, with non-food continuing to struggle,” said Helen Dickinson, Chief Executive of the BRC.

Competition was heating up for the diminishing pool of discretionary consumer spending power, Dickinson said. As well as food, homeware and footwear were among the sectors to have won last month.

Paul Martin, UK head of retail at accountancy firm KPMG, which sponsors the index, said the figures seemed to defy weak readings of consumer confidence recently, retailers should not count on a sustained pickup.

“This divide suggests that UK shopping patterns remain mixed, although with demand continuing to be weak, retailers would be wise to remain cautious,” he said.

Reporting by Emma Rumney; Editing by William Schomberg