UK Retail Sales Lift 0.1% in June as Discounting Fails to Boost Consumer Demand

UK retail sales volume rose just 0.1 percent month-on-month in June, reported the Office for National Statistics (ONS), showing that retailers' desperate tactic of heavy price discounting to lure in hard-pressed consumers is all but failing.

Total sales value in June dropped by 0.5 percent when compared with May, reflecting the sharp fall in consumer price inflation that month.

The Queen's Diamond Jubilee did not have any meaningful impact on sales, though the cool weather and large rainfall totals appeared to depress the figures.

ONS data reveals that retailers are almost completely beholden to the grim macroeconomic picture as, with discounting failing to significantly boost sales volume, there is little they can do to lift consumer demand.

British retailers have been battling against dampened consumer confidence in recent months.

The country plunged back into recession at the start of the year and the economic contraction looks set to continue for the whole first half.

Inflation has been sticky, though fell sharply to 2.4 percent in June, and continues to outstrip wage growth, keeping household budgets squeezed and eroding disposable income as consumers focus on paying their bills rather than splashing cash on the high street.

Crisis in the eurozone continues to hang over the UK, threatening another financial disaster, keeping job fears at the fore of people's minds.

While unemployment has fallen slightly in recent months, the rise in employment has largely been down to an increase in part-time and self-employed workers.

There continues to be a lack of full-time, permanent jobs that offer security and a decent income.

There were 2.58 million unemployed people in the quarter to May, down 65,000 on the previous three months, putting it at a rate of 8.1 percent.

Unseasonably bad weather in July looks like it will have a serious effect on UK retailers, as they may struggle to shift their summer lines with washed out Britons forced to stay indoors.

"The prolonged wet weather we have had through the summer has effectively suffocated demand for an awful lot of stock many retailers have in store, whether that is summer clothing, summer shoes, barbecue equipment or gardening gear," Sarah Cordey, spokeswoman for industry representatives the British Retail Consortium (BRC), told IBTimes UK in a recent interview.

Ernst & Young, the accountancy firm, predicted an "Indian summer" for the UK economy with growth in the second half of year, driven by a short-term recovery in consumer demand as inflation falls.

"Inflation is now coming back to heel, helped by the chancellor's decision to postpone the increase in fuel duty, falling energy and commodity prices, plus tax changes dropping out of the calculation," Peter Spencer, chief economic advisor for the Ernst & Young ITEM Club report, said.

"The boost to household finances and the subsequent pick-up in spending should be enough to push the UK back into positive territory this year, but don't expect a consumer-led recovery further out."