UK June retail sales growth slows to 7-month low

LONDON, United Kingdom - British annual retail sales growth slowed unexpectedly this month to a seven-month low as demand for clothing and food fell back, the Confederation of British Industry said on Wednesday.

The CBI distributive trades survey's retail sales balance dropped to +4 in June from +16 in May, its lowest since November and in sharp contrast to economists' forecasts in a Reuters poll for it to recover to +24.

Expectations for July were also subdued, with this index dropping to a five-month low.

Britain's surprisingly fast economic recovery has been driven by consumer demand, but wage growth has lagged, raising questions about how sustainable such a rebound will be.

"After a recent improved run ... a fall in clothing and food sales has contributed to a disappointing month," said Barry Williams, who chairs the CBI survey panel and is a senior executive at Asda, Wal-Mart's British supermarket chain.

Data released earlier in June showed that even though a record number of people found work in the three months to April, annual pay growth slowed. BoE Governor Mark Carney said on Tuesday that stronger wage growth was fundamental for sustained consumption - which had been a key engine of British growth.

He played down expectations of an interest rate hike this year, saying there was still plenty of slack in the labour market for the economy to work through.

"The loss of momentum in retail sales in June indicated by the CBI does raise question marks as to how strong consumer spending can be until earnings growth picks up appreciably," Howard Archer, chief UK economist at IHS Global Insight said.

Official data released earlier this month showed British retail sales volumes suffered their first fall since January last month, but were 3.9 percent higher than a year earlier.

The CBI survey of 63 retail chains took place between May 28 and June 12.