U.K. July Retail Sales Increase for Second Month on Furniture

Aug. 20 (Bloomberg) — U.K. retail sales increased for a second month in July as shoppers bought more furniture and electrical goods, a sign consumer spending is reviving as the recession eases.

Sales rose 0.4 percent from June, when they climbed 1.3 percent, the Office for National Statistics said today in London. The result matched the median prediction of 28 economists in a Bloomberg News survey. From a year earlier, sales rose 3.3 percent, the most in 14 months.

The Bank of England this month extended its program to buy bonds with newly created money by 50 billion pounds ($83 billion) to cement the economy’s escape from recession. Governor Mervyn King, who wanted an even bigger increase, said last week the plan will continue “until we start to see some signs of money growth and nominal spending in the economy recovering.”

“Retail sales seem to have held up well during the downturn,” said Peter Dixon, an economist at Commerzbank AG in London. “Maybe job security fears have eased up a bit. The trend for the next few months will be for broadly flat sales.”

Sales at non-food stores rose 1.1 percent on the month, offsetting a 1 percent drop at food retailers, the statistics office said. Household goods store sales increased by 4.5 percent, the most in almost three years.

Regional agents for the central bank reported the highest gains in retail sales in a year last month, with values rising 0.4 percent, the bank said yesterday.

Rising Unemployment

Bank of England policy maker Andrew Sentance said Aug. 16 that he expects a return to economic growth in the second half. Unemployment rose to the highest level since 1995 in the second quarter. The economy shrank 0.8 percent in the period, the fifth quarter of contraction.

Next Plc, Britain’s second-largest clothing retailer, said July 21 that sales rebounded because of warm summer weather. It also said the revival is unlikely to last.

The Bank of England increased its asset purchase program to 175 billion pounds after the U.K. recession proved deeper than it previously thought. It also left the key interest rate at a record low of 0.5 percent. King was defeated in a push to expand the program even more, to 200 billion pounds.

The retail sales deflator, used to measure changes in shop prices, showed a 0.7 percent annual drop, today’s report showed.

Source: Bloomberg