Wet June dampens UK retail sales growth

British retail sales rose less than expected last month as supermarkets suffered because of exceptionally wet weather, official data showed yesterday.

The Office for National Statistics said sales rose 0.2 per cent last month, leaving them 3.4 per cent up on the year.

Economists had predicted a 0.3 per cent monthly gain and the pound immediately fell as dealers bet that, at the margin, the figures might reduce the need for another interest rate rise.

The Bank of England has already raised interest rates five times to 5.75 per cent since last August in order to bring inflation down and financial markets are predicting at least one more quarter-point increase.

"Given consumer spending remains the key driver of growth in the UK economy, any weakness will boost the chances that rates will peak at six per cent rather than 6.25 per cent," said James Knightley, economist at ING.

At least part of last month's slowdown in sales can be blamed on it being the wettest June on record. The ONS said food sales dropped an unusually large 1.1 per cent, probably as Britons were forced to abandon their beloved summer barbecues.