Week ahead for British retail: healthy growth threatened by deflation woes

Although the heat wave is starting to recede in the UK, the publication of official data of consumer’s confidence in June, as well as inflation, promise to keep heating the retail market. The industry is expecting big players such as Burberry or Sports Direct to lift the spirits and dismiss the deflation woes.

On Tuesday, the British Retail Consortium publishes its sales monitor for June, which is tipped to show healthy growth after official data from the Office for National Statistics (ONS) revealed volumes in May were 4.6 percent higher than a year ago, advanced the ‘Telegraph’.

Meanwhile, economists don´t agree on whether official figures to be revealed by the ONS Tuesday will reveal consumer prices index (CPI) was steady at 0.1 percent or fell back into deflation. In this regard, Morgan Stanley economists believe the CPI fell to minus 0.1 percent in June on the back of lower clothing and furniture prices.

However, the private bank´s economists remain positive and predict the move will be temporary, with inflation creeping back into positive again this month and remaining “flattish” before starting to rise in the third quarter of the year, reports the ‘Scotman’.

Equally positive is Howard Archer, chief UK and European economist at IHS Global Insight, who calculates June’s CPI will have held steady at 0.1 per cent amid “some firming of food prices and overall less discounting by retailers than a year ago”, reports the ‘Scotman’.

Regarding corporate releases, Burberry will take the industry by storm on Wednesday, as the retailer is expected to report slower trading due to disappointing full–year figures. Brokers at Hargreaves Lansdown forecast that the company headed by Christopher Bailey will post sales for the first three months of the year up between 6 and 7 percent, well behind the 17 percent posted in the same quarter a year ago.

The next day will be the turn of Sports Direct to make its annual results public. The UK’s largest sportswear retailer has already said that underlying earnings would be in line with forecasts of 380 million pounds.