UK retail sales fall raises fears of slowing economy
unexpectedly dropped last month raising concern about whether consumer spending would continue to provide support to the slowing economy. Sales fell 0.1 per cent in October compared with the previous month, according to the Office for National Statistics. Economists polled by Reuters had forecast a 0.2 per cent expansion. The decline resulted in growth in the three months to October slowing to 0.2 per cent - the slowest pace since April 2018 - down from 0.6 per cent in the third quarter. But economists cautioned against reading too much into the October figures given there was growing evidence of the influence of the so-called "Black Friday" discounting on end-of-year shopping patterns. Heavy discounting over several days at the end of November appears to be depressing consumer spending in October as well as in December, in the run-up to Christmas.
"Consumers could just be holding off on purchases ahead of 'Black Friday' discounts in November, which are poorly captured in the ONS seasonal adjustment process," said Thomas Pugh, UK economist at Capital Economics. Last year, retail spending dropped 0.1 per cent in October, and then rose sharply by 1.3 per cent in November, largely driven by a 36 per cent growth month-onmonth in internet sales.
But there are also fears that the data could signal a softening of consumer spending, which has helped prop up the ailing economy so far. "Some of last month's weakness may reflect the recent softness in the labour market. With fewer people in employment, wage growth slowing and sentiment poor, consumers may feel like they need to save rather than spend," said Mr Pugh. Howard Archer, chief economic adviser at the consultancy EY Item Club, agreed. "The recent softer retail sales data suggests that consumers have recently become more concerned by the combination of a struggling domestic economy, heightened domestic political and Brexit uncertainties and a deteriorating and more fractious global economic environment," he said. Sales dropped across most of the main sectors, with the steepest decline in household goods, which recorded a 1.3 per cent fall over the previous month. Only department stores and petrol stations defied the downturn in sales. Sales from department stores were up 2 per cent over the previous month, after contracting for most of the past two years.
The ONS said early Christmas promotions and other discounting had helped lift performance "Department store sales rebounded in October, driven by promotional events and an earlier introduction of Christmas lines. However, their sales still remain significantly down over the longer term," the ONS said.
For most of this year, consumers spending has remained resilient despite high political uncertainties linked to Brexit and the UK departure from the EU, supported by a strong labour market.