UK Retail Sales Fall Most In 6 Months

Ivan Schwartz
October 20, 2017

The ONS said yesterday's figures pointed to retail sales adding 0.03 percentage points to economic growth in the third quarter, compared with 0.09 percentage points in the second quarter.

Although September's monthly retail sales reversed August's growth, there was a continuation of the underlying trend of steady growth in sales volumes, said ONS senior statistician Kate Davies, following a weak start to the year, and a background of generally rising prices. Non-store retailing sales (i.e. mainly online and mail order) rose 0.2% over the month.

The decline was driven largely by a fall in sales of non-essential items, such as spectacles, souvenirs, weapons and collectables.

The data revealed that third-quarter retail growth slowed to 1.5% year-on-year, its lowest since the second quarter of 2013. The effect of inflation was shown as the quantity bought grew more slowly, by 1.2% on past year, and fell by 0.8% on last month.

Consumer price growth stood at 3% in September, the fastest pace of inflation in over five and a half years. This was also weaker than the expected 2.1 percent. Inflation is set to rise above 3 percent in the next month or two, the Bank of England warned Tuesday, with expectations that interest rates might soon rise for the first time in a decade.

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On an annual basis, sales rose 1.2%, falling below the 2.1% increase analysts had forecast, while the 2.4% increase from the previous month was revised lower to 2.3%. "On top of that the Bank could well find its credibility compromised if it fails to follow through on its recent hawkish commentary, and would once again be on the hook for providing "forward misguidance".

With rising inflation and increasing consumer debt, a rate hike just as the industry enters the key Christmas period would be "an additional headache for retailers", he said.

Ian Geddes, head of retail at Deloitte, said a November rate rise "could come at a challenging time for the retail sector". The expected growth rate was 2.2 percent.

"Moreover, consumer confidence is relatively fragile with considerable caution over making major purchases. Meanwhile, lenders are becoming more reluctant to provide unsecured credit to consumers". Once inflation is taken into...

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