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U.K. Retail Sales Stagnate as Prices, Weather Hit Clothing

Posted by Chris Advincula on Oct 20, 2016 7:06:58 AM

 uksales.10.20.2016.jpg

>  Underlying trend is 'one of strength,' statisticians say

>  Retail Sales contribute to 3Q GDP with 1.8% quarterly gain

(Oct 20 Bloomberg) U.K. retail sales stagnated for a second month in September as soaring prices and warm weather hit demand for clothing.

The figures, from the Office for National Statistics Thursday, also showed that sales excluding auto fuel were unchanged from August. Small increases on both measures had been expected by economists.

Clothing and footwear sales fell 2.8 percent after prices surged 5.2 percent, the most in six years. Britain also enjoyed one of the warmest Septembers on record, leading people to put off buying autumn fashion lines. A strong July helped overall retail sales increase 1.8 percent in three months through September, the best quarter since the end of 2014.

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"The underlying trend is one of strength, suggesting consumer confidence has remained steady" since the June Brexit referendum, ONS statistician Kate Davies said. "There was some variation between store types; clothing sales saw a fall in the quantity bought in part due to rising prices and a warmer than average September."

The figures suggest the economy is continuing to be driven by consumer spending, with retail sales contributing 0.1 percent to gross domestic product in the third quarter. Annual sales growth in the third quarter held at 5.4 percent, the strongest since the start of the year.

Inflation Bites

Consumers are expected to come under pressure as the weaker pound stokes inflation, however. Figures Wednesday showed real wages growing at their slowest pace since early last year.

"The data add to the increasing body of news which point to the economy having maintained steady, albeit unexciting, growth in the third quarter," said Chris Williamson, an economist at IHS Markit.  "However, the concern is that we may be starting to see signs that rising inflation, weak pay growth and job insecurity among households are all starting to subdue consumer spending."

Sales of food and non-food both fell. Declines were offset by household goods, up 3.7 percent, and non-store sales, which gained 1.5 percent. Fuel sales were unchanged.

Bloomberg: (by Lucy Meakin)

Topics: U.K. Economy, U.K. Inflation, Forex, Fundamentals, U.K. Retail Sales

 

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