United Kingdom retail sales weaker than forecast, adding to BoE doubts

Gladys Abbott
October 20, 2017

On the other hand, total earnings in cash terms grew slower than prices over the last year, meaning the real value continues to fall.The combination of rising inflation and stagnating wage growth meant that real wages fell by 0.3 percent.A total of 1.4 million people were recorded unemployed at the end of August, down 215,000 on a year earlier, the ONS added.

There was an unexpectedly sharp fall of 0.8% last month, reversing a surge in August, according to the Office for National Statistics (ONS).

The decline was driven largely by a fall in sales of non-essential items, such as spectacles, souvenirs, weapons and collectables.

Year-on-year retail growth for Q3 overall was 1.3 percent, which is the weakest rate of annual growth since Q2 in 2013.

Likewise, retail sales volume excluding auto fuel slid 0.7 percent, in contrast to August's 0.9 percent increase.

Inflation in the United Kingdom has risen to its highest level in five years, squeezing the spending power of households but giving a boost to pensioners who will enjoy an increase in their state income.

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The ONS said retail prices continued to rise across all store types and were up 3.3% from a year earlier, the highest year-on-year increase since March 2012. Excluding bonuses, average earnings were 2.1 percent higher.

"Issues around consumer finances, spending power and rising cost pressures are already challenging the industry: an interest rate rise could cause an additional headache for retailers in the lead-up to Christmas".

An escalation in price index that, as confirmed by Governor of Bank of England, Mark Carney, could "lead to an increase in interest rates in near future" if economy followed path it was taking, as one of tasks of Organism is to keep CPI at 2%.

United Kingdom retail sales fell more than expected in September, as inflation fuelled by a post-Brexit vote fall in the pound continued to chip away at household budgets.

"Moreover, consumer confidence is relatively fragile with considerable caution over making major purchases".

"A hike would help control inflation, but would further ease demand in the retail sector, whereas keeping rates on hold would favour demand, but could see inflation rising above the BoE's 3.0% maximum estimate of inflation".

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