UK retail sales grow faster in July, helped by World Cup and clothes discounting

LONDON, Aug 16 (Reuters) - British retail sales grew faster than expected last month, after hot weather and the World Cup continued to boost food sales and shoppers took advantage of extended discounts on clothing and online sales.

Retail sales volumes in July rose by 0.7 percent, and were 3.5 percent higher than a year earlier, above economists' forecasts in a Reuters poll for a 0.2 percent monthly rise and a 3.0 percent annual gain.

Looking at the three months to July as a whole, which smoothes out some monthly volatility, retail sales grew by 2.1 percent versus the previous three months, the biggest expansion since February 2015. Excluding fuel purchases, sales growth was the fastest since March 2004.

The sales growth comes despite tricky trading conditions for many high-street retailers.

High inflation and lacklustre pay increases have weakened household spending power for much of the past year. Weak pay growth shows limited signs of strengthening as Britain prepares to leave the European Union in March next year.

Earlier this month BoE Govenor Mark Carney said there was an "uncomfortably high" risk of Britain leaving the EU without any kind of transition deal, which would damage growth.

Britain's economy recorded solid but unspectacular growth in the second quarter of 2018 after unusually heavy snow weakened demand in the first three months of the year, and earlier this month the BoE raised interest rates for only the second time in more than a decade.

June and July were unusually warm, and previous surveys of consumer spending have shown that the soccer World Cup encouraged some Britons to spend in pubs and bars rather than in high street shops.

"Many consumers stayed away from some high street stores in July, but online sales were very strong, supported by several retailers launching promotions," ONS statistician Rhian Murphy said. "Food sales remained robust as people continued to enjoy the World Cup and the sunshine."

Clothing sales recorded their strongest year-on-year growth since December, also helped by sales promotions, the ONS said.

Many high street retailers are struggling with online competition. Department store House of Fraser sought creditor protection and was bought by sportswear chain Sports Direct last week, and home improvement retailer Homebase said this week it would close 42 stores, affecting 1,500 jobs.

(Reporting by David Milliken and William Schomberg)

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