UK retail sales data beat market expectations during the hottest June on record, benefitting department stores in particular.
Retail sales volumes, including petrol, rose by 0.7% compared to the month before, which was stronger than the average forecast of 0.2%.
The data from the Office for National Statistics (ONS) showed a year-on-year decline in retail sales of 1.0%, which was an improvement from the 2.1% drop in May, above the consensus estimate of a 1.6% fall and the smallest fall since the beginning of the Ukraine war.
Average temperatures in June were 2.7° Celsius above the June average between 1970 and 2020.
Department stores saw the benefit as sales volumes increased 1.9%, while there was also a 1.4% increase in sales at household goods stores due to strong sales of furniture.
Food store sales jumped 0.7% to more than reverse May’s 0.4% drop.
ONS chief economist Grant Fitzner said: “Retail sales grew strongly, with food sales bouncing back from the effects of the extra bank holiday, partly helped by good weather, and department stores and furniture shops also having a strong month.
“However, these were partially offset by falls in fuel, garden centres and clothes shops.”
Economist Gabriella Dickens at Pantheon Macroeconomics said the unusually warm weather "likely drove most" of the month-to-month increase in non-food store sales.
"Retail sales volumes still were below their pre-Covid level in June, but the 1.0% shortfall was the smallest since September, and the 0.4% quarter-on-quarter increase in in Q2 marked the first time they had risen by two consecutive quarters since Q3 2019.
"We expect sales volumes to rise further in the second half of this year, as real disposable incomes start to recover," Dickens said.
Economist Chris Turner at ING noted that the pound was rallying this morning on the back of the strong UK retail sales data.
"The data will also feed into the Bank of England's narrative that the consumer can handle higher interest rates," he said.