Supermarket price wars hit retail sales growth

AN unexpected fall in food sales, as a result of continuing supermarket price wars, saw total retail sales rise just 0.1% to 2.6% in July, official figures reveal.

The growth was weaker than many analysts’ estimates that the month-on-month increase would be about 0.4%. The ONS said that downward pressure on retail sales came from non-store retailing and fuel. Prices in stores fell 0.9%, after being flat in June.

The 1.3% fall in spending in food stores in July was the first year-on-year decline since 1989 when the series began.

The weaker than expected numbers will further ease fears that the Bank of England may seek to increase interest rates before Christmas.

Martin Beck, senior economic advisor to the EY ITEM Club, said: “July saw the slowest annual growth in retail sales since November 2013. There also appear to be deeper deflationary forces at work, driven in part by the ongoing supermarket price war. July was the first time since records began that the amount spent in food stores fell on an annual basis.

“Looking forward, further rises in employment and downward pressure on shop prices should support growth in retail spending. But the prospect of only a modest pick-up in earnings is likely to dampen the rate of expansion.”