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Decline In U.K. Retail Sales Exceeds Expectations

Decline In U.K. Retail Sales Exceeds Expectations

U.K. retail sales eased more-than-expected in October, reflecting weak demand for food and clothing ahead of the Christmas shopping season.

Sales volume that include automotive fuel declined 0.8 percent month-on-month in October, reversing the previous month's 0.5 percent rise, the Office for National Statistics reported Thursday. It was forecast to fall just 0.1 percent in October.

Likewise, sales excluding automotive fuel were down 0.7 percent after increasing 0.5 percent a month ago.

The latest decline suggests that the economy gained no tangible support from consumer spending in the last quarter of 2012. Disappointing retail sales data is a serious blow to hopes that the economy can keep growth in the fourth quarter, said IHS Global Insight's Chief UK economist Howard Archer.

Renewed pick up in inflation together with rising signs that the resilience of employment is starting to fade mean that the backdrop for spending is not looking good ahead of Christmas, said Samuel Tombs, UK economist at Capital Economics.

Predominantly food stores sales dropped 0.6 percent, the biggest drop since November 2011. Non-food store sales slipped 1 percent from the prior month, within which clothing sales dipped 2.3 percent.

On a yearly basis, growth in overall retail sales eased more than expected to 0.6 percent from 2.4 percent. The expected rate of growth was 1.6 percent. Similarly, sales that exclude automotive fuel rose 1.1 percent, down from September's 2.7 percent increase.

Suggesting that inflationary pressures are picking up, the retail sales deflator gained 0.9 percent in October from last year. The central bank yesterday said it does not expect inflation to fall back until the second half of 2013.

The bank maintained the size of quantitative easing at GBP 375 billion early this month as the economy exited a double-dip recession in the third quarter.

Bank of England Governor Mervyn King said yesterday that the Monetary Policy Committee has not lost faith in quantitative easing as a policy instrument.

by RTT Staff Writer

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