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Strong retail sales growth in October

British retail sales grew strongly again this month, with supermarkets luring shoppers with discounts and clothes stores performing better in the cooler weather.

It was the third month of above-average sales growth reported by the CBI in its survey of retailers and beat City expectations for a slowdown in October. Sales enjoyed their fastest growth for more than three years when counted over the three-month period of August to October.

Retailers were also upbeat about the month ahead, forecasting another strong rise in sales.
however, fortunes were mixed across the sectors, with hardware and DIY suffering a fall in October, echoing signs of a cooling housing market as well as the recent announcement by Homebase that it is closing stores as consumer interest in home improvement projects wanes.

Sales also fell at chemists and at specialist food and drink firms, the CBI said.

The headline findings were upbeat and contrast with a report earlier this month from the British Retail Consortium that high street and online stores had put in their weakest performance since the depth of the 2008-09 recession.

The CBI said its measure of sales volumes was 31% in October, unchanged from September’s balance, as 48% of retailers said sales volumes increased on a year earlier, while 17% said they fell. Economists polled by Reuters had expected a balance of 25% this month.

Rain Newton-Smith, the CBI’s director of economics, said: “Sales on our high streets are still ticking along and, with similar prospects next month, retail growth is looking more stable.

“The clothing sector in particular appears to be bouncing back after the mild weather in September deterred people from buying their winter warmers. The recent fall in inflation may help lift the spirits of households by making their budgets stretch further. But risks remain to the UK recovery more generally, with the eurozone stalling, conflict in the Middle East and tensions over Ukraine. This could have an impact on consumer confidence and spending going forward.”

Recent indicators point to more cautious spending as households continue to struggle with wages falling in real terms. There have also been signs of consumer confidence being dented by the housing market coming off the boil and the prospect of a rise in interest rates, though this is not expected until at least the middle of next year.

Commenting on the CBI figures, Howard Archer, economist at IHS Global Insight, said: “Following some recent mixed news on the economy, a very decent October CBI distributive trades survey provides some reassurance that consumers are still prepared to spend at a healthy rate.

“Retailers will be very much hoping that this remains the case as the critical Christmas period looms on the horizon.”

Source : Katie Allen - The Guardian


27 October 2014

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