Re­tail sales fall year on year

The Sunday Telegraph - Money & Business - - Business - By Tim Wal­lace

BRI­TISH shops suf­fered the first an­nual fall in re­tail sales since early 2013 last month as ris­ing in­fla­tion and slug­gish pay growth hit house­holds.

Re­tail sales are es­ti­mated to have fallen by 0.6pc com­pared with Oc­to­ber 2016. Of­fi­cial fig­ures will re­veal the full ex­tent of the dam­age com­pared to con­sen­sus es­ti­mates on Thurs­day.

In­fla­tion is thought to have risen to 3.1pc last month, its high­est level since 2012. Growth in av­er­age earn­ings is be­lieved to have slowed to 2.1pc in the year to the third quar­ter, fail­ing to keep up with prices and in­ten­si­fy­ing the squeeze on house­hold fi­nances.

This rise in in­fla­tion breaks the Bank of Eng­land’s tar­get of 2pc by more than one per­cent­age point, mean­ing Mark Car­ney has to write a let­ter to the Chan­cel­lor ex­plain­ing why in­fla­tion has gone so awry. Mr Car­ney did raise in­ter­est rates at the start of this month in part to keep a lid on price rises, so he will be able to show ac­tion has been taken.

Fac­tors push­ing up prices in­clude Bri­tish Gas’s rise in bills, the end of the su­per­mar­ket price war, higher oil prices push­ing up air­fares, and the last of the ef­fect of the fall in the pound rais­ing the cost of im­ports.

“This should be in­fla­tion’s peak,” said econ­o­mist Alan Clarke at Sco­tia­bank, who forecasts an even higher rate of 3.2pc.

“We’ve gone from [re­tail sales growth] of 5pc or 6pc per year, steadily down and down as house­holds’ real take home pay growth has been crushed – it has gone from about 4pc year on year to zero now.”

Do­minic Bryant, an econ­o­mist at BNP Paribas, ex­pects the re­cent high level of in­fla­tion should en­cour­age more firms to raise salaries.

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