by William Schomberg and William James

LONDON (Reuters) – British retailers saw a bigger-than-expected drop in sales in July as heavy rain discouraged consumers already hurt by high inflation and consecutive interest rate hikes.

Retail sales in Britain fell 1.2% month on month, official data showed on Friday. Economists polled by Reuters had forecast a decline of 0.5%.

The pound weakened after the statistic as investors weighed whether the drop in selling represents a warning signal for the British economy or is just a reflection of the gloomy weather, with the sixth wettest month of July since 1836.

“It was a particularly bad month for supermarkets, as summer rain combined with the rising cost of living led to lower sales of clothing and food products,” said Heather Bovill, deputy director of surveys and economic indicators at the Office for National Statistics (ONS).

“Department store and household goods sales also fell significantly,” she said.

Many shoppers shopped online, rather than stepping out in the rain, with 27.4% of retail sales compared to 26.0% in June being made via the internet, the highest share since February 2022.

Sales volumes at food stores fell 2.6% month-on-month, while those at non-food stores fell 1.7%.

This decline follows a good month of June for retailers, who had then benefited from a heat wave.

Along with the unpredictability of Britain’s weather, consumers have been hurt by high inflation, which hit nearly 7% last month, the highest among major global economies.

However, the July data is only the second one-month retail sales decline seen in 2023, suggesting resilience in domestic demand.

(With contributions by James Davey; Nathan Vifflin; editing by Blandine Hénault)

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