Retail sales surge in October

Retail sales surged by 1.9 per cent in October, far outstripping City analysts’ expectations and showing continued strength of household consumption despite the Brexit vote, reports The Independent.

The Office for National Statistics reported that the monthly growth in the much-watched indicator was the strongest since July.

City analysts had pencilled in 0.5 per cent growth.

Statisticians said cooler temperatures in October had prompted strong sales of winter clothing and that supermarket trade had been boosted by Halloween.

The annual growth rate of retail sales was 7.4 per cent.

They are regarded as a key barometer of wider economic momentum.

The economy grew by 0.5 per cent in the third quarter of 2016, confounding forecasts that the Brexit vote could tip the UK into another recession.

Some analysts said the latest strong retail figures boded well for growth in the final quarter of 2016 too.

“Even allowing for some helpful special factors, October’s surge in retail sales indicates that consumers were still prepared to spend at the start of the fourth quarter, thereby buoying hopes that GDP growth can continue to hold up well,” said Howard Archer of IHS Markit.

However, others warned that a spike in inflation would soon take a toll on spending.

“We doubt that high-street spending will maintain this pace … the squeeze in real income growth is yet to come,” said Paul Hollingsworth of Capital Economics.

“Falling real wages, potentially higher unemployment and possibly even some house price softness could be a major headwind to consumer spending and overall growth next year,” said James Smith of ING.

Inflation was 0.9 per cent in October and is projected to rise rapidly above 2 per cent next year by most forecasters, while average wage growth remains lacklustre.

UK retail sales price inflation was still negative in October, with prices 0.7 per cent down on the same month a year earlier.

But the price index has been rising rapidly thanks to the stabilisation of global oil prices and the depreciation of sterling since June is expected to push it rapidly into positive territory soon.

The ONS also reported today that the powerful shift to internet sales continues.

As a percentage of total retails sales, internet purchases accounted for 15.2 per cent, versus 12.7 per cent in the same month a year earlier.