Published: Sat, October 21, 2017
Economy | By Melissa Porter

United Kingdom retail sales drop on Brexit-fuelled inflation

United Kingdom retail sales drop on Brexit-fuelled inflation

Rachel Lund, head of retail insight and analytics at the British Retail Consortium, said: "September's sales showed little evidence of consumers seriously shifting their shopping behaviour in response to the squeeze on spending power; with sales up in volume and value terms on past year".

Rising prices helped sales at United Kingdom clothing and footwear stores edge up in September, making this one of the few categories to buck an overall decline in total retail sales value and volume since August.

There was an unexpectedly sharp fall of 0.8 per cent last month, reversing a surge in August, according to the Office for National Statistics (ONS).

Helal Miah, investment research analyst at The Share Centre, said attention will turn to the Bank of England as inflation hit 3%, while average wage growth languishes at around 2%, despite record low unemployment rates.

The clothing and footwear sector has experienced growth in 2017, following periods of year on year declines in 2016.

Monthly figures showed the quantity of food bought and amount spent in grocery stores decreased by 0.6% and 0.3%, respectively. Inflation was at a five year high of 3 percent in September and is expected to increase a little above that in October.

Online sales values increased year-on-year by 14%, accounting for approximately 17% of all retail spending.

Britain's retail industry has been under pressure this year, with the weaker pound boosting stores' import costs and intense competition restricting price increases.

'However, there is a continuation of the underlying trend of steady growth in sales volumes following a weak start to the year, and a background of generally rising prices.

At the same time, faster inflation has restrained consumer spending, and Sainsbury Plc and Tesco have both announced job cuts this year. A rising cost of living is never popular, and there will be growing calls for an interest rate intervention next month.

United Kingdom retail sales dropped sharply in September despite an underlying trend of steady growth in the face of rising prices, figures show.

Given the tightening in the labor market, the Monetary Policy Committee will follow through on its suggestion that it could raise interest rates "over the coming months", with the first 25 basis point hike set for November, Capital Economics' Andrew Wishart said.

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