UK retail sales surge in August, price pressures up too - CBI

By William Schomberg

LONDON (Reuters) - British retailers reported the biggest surge in spending in almost seven years this month and orders hit a new high but stocks fell to the lowest levels on record, putting pressure on prices, industry data showed on Tuesday.

The Confederation of British Industry's measure of the volume of sales compared with a year earlier soared to +60, the highest since December 2014, from +23 in July. A Reuters poll of economists had pointed to a fall to +20.

Alpesh Paleja, a CBI economist, said consumer demand was spurring an economic recovery from the coronavirus crisis but spending was expected to settle down later in the year.

"Furthermore, there are signs of operational challenges still biting, with stock levels reaching another record low and import penetration falling," he said.

"Disruption is being exacerbated by continued labour shortages, with many retailers reliant on younger employees currently awaiting their jab."

However, the relaxation of self-isolation rules for fully vaccinated people who had been in contact with others with COVID-19 had eased the some of the staffing squeeze on many retailers.

The Bank of England is watching how much Britons spend from savings they built up during the lockdown.

It is also looking at whether bottlenecks in supply caused by the pandemic - such as dwindling stocks in the retail sector - will lead to longer-term inflation pressures.

The CBI said retailers reported that selling prices in the three months to August increased at the fastest pace since November 2017 and the picture for the next quarter looked similar.

Official data published last week showed an unexpectedly big fall in retail sales in July, suggesting a slowing of momentum in the country's recovery from lockdowns.

(Reporting by William Schomberg, editing by David Milliken)