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U.K. Retail Sales Stall as Consumer Weakness Persists: Economy

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U.K. Retail Sales Unexpectedly Stagnate on Department Store Drop
Pedestrians carry shopping bags over rain puddles along Oxford Street in central London. Photographer: Simon Dawson/Bloomberg

Dec. 20 (Bloomberg) -- U.K. retail sales unexpectedly stagnated in November as spending at department stores slumped the most in almost two years.

Sales including fuel were unchanged from October, when they fell 0.7 percent, the Office for National Statistics said today in London. The median forecast of 22 economists in a Bloomberg News survey was for a 0.4 percent increase. Sales at non-specialized stores, mainly department stores, fell 1.5 percent, the most since February 2011. The strongest growth was in electrical goods, boosted by tablet computers such as Apple Inc.’s iPad.

The figures add to signs of weakness in consumer spending in the build-up to the Christmas shopping season after the Confederation of British Industry said yesterday that retail-sales growth cooled in December. Increases in electricity and gas prices are keeping pressure on consumers as inflation continues to outpace wage gains.

“The economic outlook has got worse and consumers are probably still really uncertain,” said Rob Wood, an economist at Berenberg Bank in London and a former Bank of England official. “There’s no good news ahead for them in the near term.”

Today’s data also showed that online shopping continues to increase and now accounts for 10.8 percent of all retail sales. Britons spent an average of 711 million pounds ($1.2 billion) a week online in November, an 8 percent increase from a year earlier.

London-based Asos Plc, the U.K.’s largest online-only fashion retailer, said Dec. 11 first-quarter sales rose 30 percent in the three months ended Nov. 30 as it lowered prices of its own-brand label.

Clothes Sales

Sales at household goods stores surged 3.8 percent in November from October, the statistics office said today. Food sales fell 0.1 percent in November, while sales of clothes and shoes dropped by the same amount. From a year earlier, total retail sales were up 0.9 percent. Excluding fuel, retail sales rose 0.1 percent in November from October and increased 2 percent on the year.

The CBI said yesterday that its gauge of annual sales growth fell to 19 in December from 33 in November. Retailers’ expectations for sales growth in January fell to 10. Anna Leach, head of economic analysis at the CBI, said that “weak spending power and uncertainty over the economic outlook are likely to remain key risks to the retail sector in 2013.”

The pound rose 0.2 percent against the dollar today and was trading at $1.6275 as of 11:20 a.m. in London.

‘Sticky’ Inflation

U.K. inflation held at a five-month high of 2.7 percent last month, remaining above the Bank of England’s 2 percent target. The central bank’s chief economist, Spencer Dale, said last week annual price gains are likely to remain “sticky.”

Today’s report showed the annual retail sales deflator, a measure of changes in shop prices, fell to 0.5 percent in November from 0.9 percent in October. The deflator on food rose to 3 percent from 2.7 percent.

The Bank of England maintained its target for quantitative easing this month as officials forecast “broadly flat” growth along with continued strains from the crisis in Europe. Policy makers also warned that the economy may shrink this quarter. Gross domestic product rose 1 percent in the three months through September, helped by a boost from the Olympics that will unwind this quarter. The third estimate for the period will be published tomorrow.

U.S. Spending

A report to be published later today by the U.S. Commerce Department may show consumer spending rose in November as Americans shopped for the holidays. Household purchases increased 0.4 percent after falling 0.2 percent in October, according to the median estimate of 66 economists in a Bloomberg News survey.

Other reports on the world’s largest economy due today may show home sales and demand for long-lasting goods rose.

Elsewhere, the Bank of Japan expanded its asset-purchase program for the third time in four months, and will reconsider its objectives for inflation as incoming Prime Minister Shinzo Abe urges more action to end price declines. The BOJ increased the asset-purchase fund to 76 trillion yen ($905 billion) from 66 trillion yen, according to a statement released in Tokyo today.

To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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