U.K. retail sales fell less than expected in June – Manufacturing and services PMI fell to a 17-month low in July

The Office for National Statistics (ONS) reported that retail sales in the United Kingdom fell less than expected in June. This is due to the fact that higher sales of food over the holidays mitigated the impact of the increased cost of living.

Retail sales declined 0.1% in June, both offline and online, after falling 0.8% in May.

According to ONS, the 3.1% increase in food sales in June was due to a holiday celebrating the 70th anniversary of Queen Elizabeth II’s accession to the throne, which helped mitigate the impact of a 4.3% decline in fuel sales.

Car use declined in the face of record oil prices. Sales of clothing and household goods also declined. Meanwhile, sales excluding fuels rose by 0.4% in June.

The U.K.’s Purchasing Managers’ Index (PMI) for manufacturing and services fell to its lowest level since February 2021 at 52.8 in July, down from 53.7 in June but still above 50, suggesting the sector continues to expand.

According to the report, factory production capacity has shrunk for the first time since May 2020, but tourism and leisure companies have more new bookings.

The decline in gross PMI was largely due to weaker demand, while persistent supply and staffing constraints were other factors behind the growth disruption.

The U.K. manufacturing PMI fell to 52.2 in July from 52.8 in June, while the primary services PMI fell to 53.3 in July from 54.3 in June.

In addition, the report states that inflationary pressures began to ease in July. This could ease the pressure on the Bank of England (BoE) to raise interest rates more sharply in August.

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