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ONS reports 0.2% drop in August retail sales volumes

UK retail sales only fell a little in August and were substantially higher than the same month a year ago, in spite of fears that the Olympics had distracted people from shopping.

Retail sales volumes fell 0.2 per cent between July and August, official data show, in line with expectations. However, they were 2.7 per cent higher than the same month last year, a reflection of the modest growth in spending this year even as economic output has dropped.

“We would not interpret the fall in sales in the release as being too bad a result,” said David Tinsley, an economist at BNP Paribas. “The Olympics might, on anecdote, have been expected to have depressed sales even more…[Indeed] the level of retail sales is still hovering around considerably higher levels than it averaged in 2011, indicating there has been some more momentum to consumer spending recently.”

There was a 2.7 per cent fall in household goods stores’ sales and a 6.7 per cent fall in “non-store retailing”, the latter reflecting an unexpected drop in internet shopping.

Internet sales fell as a proportion of total retail sales from 9 per cent in July to 8.1 per cent, the lowest for a year. The Office for National Statistics said online retailers told them “sales were lower as consumers watched the Olympics instead of shopping online”.

However, the Olympics had positive effects too. Sales in clothes, shoes and sporting goods stores rose sharply. “Feedback from these stores suggests figures were boosted by an increase in sales of football shirts with the start of the season and the European Championship, but also from increased sales as a result of the Olympics,” the ONS said.

The modest recovery in retail sales this year, after several years of stagnation, probably relates to rising employment. However, people in work are still suffering from falling real wages and the Bank of England warned this week that the squeeze was likely to continue for longer than it thought because inflation’s decline has been disrupted by higher commodity prices.

“Reinforcing belief that consumer spending is likely to be limited in the near term at least, consumer confidence remains mired near record low levels, amid elevated concerns over the economy,” said Howard Archer, an economist at IHS Global Insight. “This is likely to limit their willingness to spend, on top of the constraints on their ability to do so.”

NOTE: The full ONS publication can be downloaded from the 'Industry Articles section of this website.

Source : Sarah O’Connor – Financial Times

20 September 2012
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