UK consumers have cut back on summer spending amid the impact of poor weather and the cost of living crisis, figures show, underscoring the challenge for the Bank of England ahead of its interest rate decision on Thursday. In a sign of weakness in consumer spending over the summer months, figures from the British Retail Consortium (BRC) show that clothing and footwear prices fell for the seventh consecutive month in July as weak demand persisted. Separate figures from the Bank of England show that credit-card borrowing also slumped in June as poor weather for the time of year and concerns about the cost of living deterred households from spending. The figures came as financial markets predict the Bank’s interest rate decision on Thursday will be on a knife edge as policymakers consider whether to cut borrowing costs for the first time since the Covid pandemic. After a drop in headline inflation to the government’s 2% target for two consecutive months, City economists believe Threadneedle Street’s monetary policy committee could narrowly vote to cut interest rates from the current level of 5.25%. The Bank has said its decision will rest on whether price growth in the service sector of the economy is slowing, and whether Britain’s jobs market is cooling to levels consistent with keeping inflation near 2%. Reflecting subdued consumer appetite as households held back from spending, the BRC figures show annual shop price inflation was unchanged in July at 0.2%. This was below the three-month average rate of 0.3%, and the lowest rate since October 2021. Non-food price deflation, which means prices are falling compared with a year ago, continued at 0.9%, marginal slower than 1% in June, as retailers cut their prices in an attempt to lure reluctant consumers. The BRC’s chief executive, Helen Dickinson, said: “Holidaymakers could pick up bargain summer wear and summer reads as clothing and footwear prices fell for the seventh consecutive month amidst persistent weak demand, and the prices of books fell.” The Bank’s figures show that net consumer credit borrowing fell from £1.5bn in May to to £1.2bn in June, missing City economists’ forecasts for a stronger growth rate as households held back from borrowing to finance their spending. The global and UK head of financial services at the accountancy firm KPMG, Karim Haji, said the figures showed that customers were yet to feel the effects of recent stronger levels of economic growth and lower inflation. “What is clear is that despite two straight months of inflation remaining on target, households aren’t necessarily feeling better off for it,” he said. ”Indeed, wage growth has slowed in recent months, which may go some way to explaining this.” Retailers, however, are hopeful that a pickup in spending could come given a rise in footfall at UK shopping destinations after the start of the school summer holidays last week. The data provider MRI Software said footfall rose by 4.8% in all retail destinations compared with the previous week, led by a 6.9% jump in shopping centre activity, a 4.4% rise in visits to high streets and a 3.3% increase at retail parks. The Bank’s latest snapshot also shows that net mortgage approvals, which indicate future levels of borrowing, remained largely unchanged in June from a month earlier, in a sign of the property market treading water before the general election and Thursday’s rate decision. RBC Capital Markets’ European housebuilding analyst, Anthony Codling, said: “Stability is good, but in our view, the UK housing market appears to be treading water, waiting for, hoping for the first Bank Rate cut. There is a small chance that cut could come on Thursday, but we believe the first cut is more likely in September. Once mortgage rates start to fall, we expect housing market activity to pick up.”