U.K. retail sales expanded unexpectedly in July driven by promotions and discounting, the Office for National Statistics revealed Thursday. Further, the upward revision to June's retail sales boosted hopes that the economy contracted less than initially estimated in the second quarter.
Retail sales grew 0.3 percent in July from a month ago, confounding expectations for a 0.1 percent fall. In June, sales climbed a solid 0.8 percent, which was revised up from 0.1 percent.
The labor market also has been showing remarkable resilience amid the severe recession. The number of Britons seeking jobless benefits unexpectedly declined in July, apparently due to a temporary boost from the Olympics.
Automotive fuel was the major component behind the upward movement in retail in July with sales rising 2.6 percent. Food store sales rose 0.4 percent, while non-food store sales slipped 0.5 percent.
On a yearly basis, sales volume advanced 2.8 percent in July. The increase was better than the 2.6 percent growth logged in June and the consensus forecast of 1.4 percent growth.
Retail sales for June together with the upward revisions to construction and manufacturing figures for the second quarter lifted chances of the preliminary GDP estimate to be revised up next week.
According to the preliminary data, the U.K. economy sunk deeper into recession in the second quarter with a 0.7 percent contraction.
The Bank of England policymakers said the weakness in the second quarter reflects additional bank holidays, the minutes of the Monetary Policy meeting held in August showed yesterday. Nonetheless, the boost from the Olympics games will be short-lived.
With the squeeze on real pay from high inflation, consumer confidence at low level and the economy in recession, a sustained strong pick-up in spending still looks unlikely, said Vicky Redwood at Capital Economics.
The July trading period covered two days of the Olympic Games and retailers suggests that there has been no impact on sales from the Games, the ONS said.
Excluding automotive fuel, sales volume remained flat on a monthly basis, following June's 1.1 percent increase. At the same time, annual growth remained unchanged at 3.3 percent. Economists had expected a 0.2 percent monthly fall and an annual growth of 2 percent.
The annual implied deflator which provides an estimate of the prices of goods sold or store price inflation slowed to 0.2 percent, marking the lowest annual percentage change since October 2009.
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Forex News
June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.