UK sees weakest retail-sales growth in 4 years

by BLOOMBERG

LONDONUK retail sales fell more than forecast in September, leaving growth in the third quarter (3Q) at its weakest in four years.

Sales dropped 0.8% from August, far more than the 0.1% estimated in a Bloomberg survey.

Over the 3Q, annual growth slowed to 1.5%, the worst performance since October 2013, according to data from the Office for National Statistics (ONS) in London.

“That is a disappointing end to the 3Q,” said Alan Clarke, an economist at Scotiabank in London.

It’s “not great for the prospects for Oct 25 when we get that first estimate of 3Q gross domestic product (GDP)”.

In the three months through September, retail sales rose 0.6%, which means the sector probably made a minimal contribution — just 0.03 percentage point — to GDP.

The pound dropped after the data, falling 0.5% to US$1.3140 (RM5.55) as of 9:39am London time yesterday. It’s depreciated almost 2% this month.

Britain’s retail industry has been under pressure this year, with the weaker pound boosting stores’ import costs and intense competition restricting price increases.

At the same time, faster inflation has restrained consumer spending, and Sainsbury plc and Tesco plc have both announced job cuts this year.

Food sales fell 0.6% on the month in September, while non-specialised stores — largely department stores — saw a 1.1% drop, the ONS said.

There was a 6.7% fall in the category of “other stores”.

Within that, the ONS cited a variety of big moves, including opticians, souvenirs, weapons and ammunition, and stamps and coins.

The data adds to policymakers’ picture of the economy as the Bank of England (BoE) approaches its first interest-rate increase in more than a decade.

The majority of rate setters, including governor Mark Carney, now believe policy will need to be tightened “in the coming months” as slack in the economy erodes.

Still, there have been some warnings that the economy isn’t ready for higher rates just yet.

While inflation has accelerated to 3%, above the BoE’s target, wage growth remains sluggish and real pay is falling, weakening household spending power. — Bloomberg