Retail sales fall year on year
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.