U.K. Retail Sales Jump 0.8% as Prices Fall Most in 12 Years

U.K. retail sales rose at the fastest pace in six months in October, boosted by sales of household goods such as furniture and spending on food.

The volume of sales including auto fuel jumped 0.8 percent from September, when they fell 0.4 percent, the Office for National Statistics said in London today. Economists forecast a 0.3 percent increase, according to the median of 23 estimates in a Bloomberg News survey. Sales excluding fuel also rose 0.8 percent on the month.

After six years of falling real wages, the squeeze on consumers is easing as retailers cut prices to compete for business. Prices as measured by the retail-sales deflator fell an annual 1.5 percent in October, the biggest decline since 2002. Prices of auto fuel dropped 4.3 percent to the lowest level since 2010.

As weakness in the euro-area weighs on foreign demand, growth in consumer spending may provide some support to the U.K. recovery. Prime Minister David Cameron said this week he can see “red warning lights” on the global economy and the U.K. cannot insulate itself completely.

“We do need to keep a watchful eye on the downside risks” but there is “plenty of extra stimulus in the pipeline,” said Rob Wood, an economist at Berenberg Bank in London. “Cheaper food and petrol prices are a boon for consumers that should help keep their confidence healthy and return some of the sparkle to U.K. growth next year.’”

U.K. Forecasts

The pound recouped losses against the dollar after the data were published, and traded at $1.5682 as of 9:33 a.m., unchanged from yesterday.

Economic growth will probably cool to 0.6 percent this quarter from 0.7 percent in the previous three months, according to a Bloomberg survey published Nov. 18.

From a year earlier, retail sales increased 4.3 percent in October, the ONS report showed. Food-store sales rose 0.3 percent on the month. Household goods gained 2.6 percent and sales at department stores increased 1.1 percent.

The price deflator showed declines in every category versus a year earlier for the first time since 2002. Food costs dropped 0.4 percent, the most since 2004.

Retail sales in the three months through October rose 0.4 percent versus a 0.2 percent increase in the third quarter.

Before it's here, it's on the Bloomberg Terminal.