Chilly June prompts UK consumers to cut back their spending

FILE PHOTO: People walk past a retail store with closing down sign in London

By Andy Bruce

(Reuters) - British consumer spending contracted in June, hurt by bad weather, according to surveys on Tuesday that added to recent signs of the country's tepid economic growth that the new Labour government has promised to boost.

Barclays said spending on its credit and debit cards fell by 0.6% in annual terms in June - the first drop since February 2021. It linked the fall to cool weather at the start of month.

"Once again, our data demonstrates the undeniable impact that unseasonable weather can have on consumer spending," Karen Johnson, Head of Retail at Barclays, said.

"The sluggish demand at the start of June even caused some fashion brands to adjust their sales schedules, although I was pleased to see that the situation has since improved with the arrival of sunnier days."

Similarly, the British Retail Consortium cited chilly weather as it reported a 0.2% drop in sales values in June compared with a year earlier, after a 0.7% rise in May.

The readings chimed with other signs of slowing growth, including business surveys, after the economy rebounded in the first quarter from a recession in the second half of 2023.

Improving economic growth is the top priority of new Prime Minister Keir Starmer whose Labour Party swept to a landslide victory in parliamentary elections on July 4.

Barclays said spending at supermarkets fell for the first time in two years last month but there were reasons for optimism.

"While June’s data suggests a weak month, the view looking ahead to the second half of the year, as we see it, is one of falling interest rates, growing real incomes, and increasing confidence among consumers to spend and businesses to invest," said Barclays' chief UK economist Jack Meaning.

Accountants KPMG, sponsor of the BRC's retail sales survey, said the economic environment was improving but said many retailers were still struggling.

Retail sales volumes, excluding petrol, remain slightly below their pre-pandemic level, according to official data.

(Reporting by Andy Bruce; Editing by William Schomberg)