Retail Sales Fall as Britons Driving Growth Take Breatherby
Decline led by clothing and footwear, household goods
Real wage growth expected to sustain consumer spending in U.K.
U.K. retail sales fell more than economists forecast last month as consumers took a breather after going on a spending spree in September.
Sales volumes declined 0.6 percent from September, the Office for National Statistics said in London on Thursday. That was more than the 0.5 percent decrease economists had forecast in a Bloomberg survey. Excluding auto fuel, sales dropped 0.9 percent, also more than predicted.
The decline followed a 1.7 percent jump in total sales in September, the biggest increase in almost a year, as Britons took advantage of promotions surrounding the Rugby World Cup and warm weather. Record employment, improving wages and negative inflation are putting money in the pockets of consumers, which is likely to sustain consumer spending.
Consumers remain "the main engine of growth” and can withstand a forecast pickup in inflation next year, said Alan Clarke, an economist at Scotiabank in London. “The U.K. consumer has reason to be happy and optimistic. The first interest-rate hike has been pushed back and back, and when rates do go up it’s been promised it will be gradual, so life doesn’t get much better."
The Bank of England held its benchmark interest rate at a record-low of 0.5 percent this month as it weighed domestic strength against below-zero inflation and a slowing world economy. Its latest forecasts were taken as a signal that low rates were needed for a while longer.
The pound was trading at $1.5269 as of 12:08 p.m. London time, up 0.2 percent on the day.
Food sales fell 1.3 percent, while non-food sales declined 0.3 percent, the ONS said. Clothing and footwear and household goods posted the biggest declines, falling 1.8 percent and 0.8 percent respectively. Sales of auto fuel rose 1.7 percent. Prices, as measured by the retail-sales deflator, fell an annual 2.1 percent in October when auto fuel is excluded.
Overall sales rose 3.8 percent from a year earlier and were 0.9 percent higher in the three months through October, the same pace of growth as in the third quarter. Sales rose 4.6 percent in the quarter compared with a year earlier, suggesting the underlying picture remains strong.
The economy’s reliance on consumer spending was highlighted by an industry survey Thursday showing factory export orders slipping to the lowest since early 2013 and manufacturers expecting output to fall in the coming three months.