Shoppers reined in their spending in July on all but food items as official figures revealed the increased cost of living is weighing on household budgets.
Shop sales rose by 0.3% – the same as June, when the Office for National Statistics revised down its preliminary figure of 0.6%.
But the figure was a shade above economists’ forecasts of 0.2%.
Growth was underpinned by strong food sales, which picked up by 1.5%, recovering from a drop of 1.1% in the previous month, as other areas except household goods fell, the ONS said.
In addition, the annual rate of sales volumes stood at just 1.3% in July, down from 2.8% in June.
The figures come hot on the heels of economic data earlier this week, which showed the rate of inflation comfortably outpacing the speed by which wages are growing.
The knock-on effect of that is that people’s spending power is slowly being eroded.
Inflation remained unchanged in July at 2.6%, but above wage growth and the Bank of England’s target of 2%.
Wages grew by 2.1% compared with the same period last year, the ONS said on Wednesday.
Once inflation is taken into account, total pay in real terms sank by 0.5% both including and excluding bonuses.
Ole Black, ONS senior statistician, said: “The underlying trend at the beginning of 2017 showed a relatively subdued picture in retail sales.
“Whilst the overall growth is the same as in June, trends in growth in different sectors are proving quite volatile.”
Chris Williamson, chief business economist at IHS Markit, said: “Subdued retail sales growth in July reflected an ongoing deterioration in household finances, linked in turn to low pay, rising prices and concern about the outlook.
“The data add weight to calls for the Bank of England to hold off with higher interest rates, as increased borrowing costs will add further pressure to family budgets.”
However, UK economist at Capital Economics Ruth Gregory, said the July figures were “fairly encouraging given the recent intensification of the squeeze on consumers’ real incomes and suggest that talk of a sharp consumer slowdown has been overdone”.
Source: SKY News