UK retail sales came in much worse than expected in October, in a warning signal for the confidence of the British consumer with Brexit approaching in 2019.
The Office for National Statistics (ONS) reported on Thursday that sales volumes fell 0.5 per cent in the month, while City of London analysts had expected growth of 0.2 per cent.
Over the three months to October sales were still up 0.4 per cent, but this was down from the 1.2 per cent rate of growth seen in September and a peak of 2.3 per cent in July, when the summer heatwave boosted spending.
In October sales at clothing stores fell 1 per cent and there was a 3 per cent slump in household goods shops.
“Retail sales slowed after a buoyant summer with the mild autumn hitting winter clothes sales. Household goods sales also fell in October following two consecutive months of strong home improvements sales,” said Rhian Murphy of the ONS.
“October’s fall in retail sales is the first real sign that consumers are tightening their purse strings due to uncertainty about Brexit,” said Samuel Tombs of Pantheon.
“Unless the government miraculously manages to force the current withdrawal agreement through parliament soon, growth in consumers’ spending will weaken markedly in Q4.”
Slowing down
Retail sales account for 20 per cent of the total UK economy and a crucial barometer of household consumption.
UK GDP is estimated by the ONS to have grown by 0.6 per cent in the third quarter of the year, but it flatlined in August and September and most economists expect a sharp slowdown in growth in the final quarter of 2018.
The annual rate of retail sales growth slumped from 3 per cent to 2.2 per cent.
But Thomas Pugh of Capital Economics said there could be something of a recovery in November’s figures.
“At least some of last month’s weakness may reflect consumers holding off on purchases ahead of Black Friday discounts in November, which are poorly captured in the ONS seasonal adjustment process,” he said.
“High oil prices also weighed on the volume of fuel sold. As such, we suspect that there could be a rebound in sales volumes in November as oil prices have fallen sharply and if Black Friday sales pick up.”
