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U.K. Retail Sales Go Cold As Christmas Shopping Season Nears

Published on Nov 16 2017 12:20 PM in Retail tagged: UK / shopping / Christmas / Brexit

U.K. Retail Sales Go Cold As Christmas Shopping Season Nears

U.K. retail sales barely rose in October as food stores saw declines for a second month and clothing dropped the most this year.

Once fuel is stripped out, overall sales increased just 0.1 percent from September, when they plunged 0.6 percent, the Office for National Statistics said on Thursday. From a year earlier, they fell 0.3 percent, the first decline in more than four years.

On a less-volatile three-month basis, there was a 1.4 percent annual gain in sales, though that was weakest since June 2013.

Consumer Sentiment

The figures may add to concern about the health of the U.K. consumer in the buildup to the crucial Christmas shopping season. Faster inflation and sluggish wage growth have squeezed households this year, with a fallout on spending and overall economic growth.

The “painful deceleration” in sales growth shows “all is not well in the retail sector,” consultancy firm Retail Economics said. “Consumers are tightening their belts and these feeble results are likely to set the tone in the run-up to Christmas.”

Uncertainty about the outlook amid deadlocked Brexit talks between Britain and the European Union may also be making shoppers more cautious. J Sainsbury Plc Chief Executive Officer Mike Coupe has warned of the negative consequences of the U.K. leaving the bloc without a trade arrangement.

The pound was little changed after the report, trading at $1.3189 as of 10:02 a.m. in London.

While consumer-price growth hit 3 percent last month, Bank of England Governor Mark Carney expects it to peak soon and ease in 2018. The central bank has also forecast a modest pickup in wage growth, which should ease the pressure on wallets.

Downward Trend

“Things are probably as bad as they are going to get, so I’d be hesitant to extrapolate the downward trend too far,” said Alan Clarke, an economist at Scotiabank in London. “Next year should be a better year as lower inflation and firmer wages reverse this year’s downwards trend.”

Sales in October were led by household goods and items such as antiques and computers. Food sales were down 0.4 percent and clothing and footwear dropped 1.5 percent. There were also declines in internet and catalog sales.

Including fuel, retail sales rose a better-than-forecast 0.3 percent in October from September and fell 0.3 percent year-on-year.

Stronger inflation has been largely driven by the pound’s decline since the Brexit vote in 2016. That’s lifted import prices, and Ikea said this month that costs at its U.K. business jumped almost 14 percent in the year to August.

News by Bloomberg, edited by ESM. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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