Yahoo Finance UK retail sales surge due to colder weather and Halloween
Consumers remain defiant despite Brexit uncertainty and inflation fears as sales grow at fastest annual pace for 14 years
A surprise leap in retail sales volumes last month has boosted hopes the UK economy will end the year on a high note, as consumers continue to shrug off the shock of the Brexit vote.
A rush to buy winter clothes and buoyant Halloween trade for supermarkets helped UK retail sales grow at the fastest annual pace for 14 years in October, according to official figures.
Defying gloomy predictions before the EU referendum that a vote to leave could spark recession, the figures showed households continued to increase their spending last month and retail sales volumes were up 7.4% on a year earlier. That was the strongest growth since early 2002 and beat forecasts for growth of 5.3% in a Reuters poll of economists.
On the month, sales were up by 1.9%, well ahead of forecasts for a 0.4% rise. But economists were quick to warn the growth would be hard to sustain.
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The Office for National Statistics said there were several factors behind the October improvement.
“Cooler temperatures in October boosted clothing sales as shoppers took their cue to purchase winter clothing, while the supermarkets benefited from Halloween. This has also coincided with the strongest growth in internet sales seen for five years,” said Kate Davies, an ONS senior statistician.
The jump in sales on a year ago came as all types of retailers, from grocers to petrol stations, enjoyed some growth. The biggest contribution came from non-store retailing, which includes market stalls and mail order as well as internet-only retailers such as Amazon.
Average weekly spending online was £1bn, an increase of 26.8% compared with October 2015.
Separate figures from online retail trade body IMRG showed home goods performed particularly well last month, with spending up 24% on the year. “This could have been spurred by a deteriorating pound, with people more focused on domestic home improvements rather than spending on holidays abroad – which have become a lot more expensive since the Brexit vote,” IMRG said, in its monthly sales snapshot published with consultancy Capgemini.
Economists said the overall rise in retail sales was encouraging for the economy’s growth prospects in the final quarter of this year, but there were warnings that consumer spending could slow next year.
“Clearly, this is a great start to fourth quarter GDP on the spending side,” said Alan Clarke, an economist at Scotiabank in London.
He said the weak pound may have played a role as it continues to attract tourists to the UK looking to snap up luxury items.
“It could also be consumers bringing forward spending to today, in anticipation of higher prices tomorrow,” he added.
After official inflation data this week came in weaker than economists expected, showing that prices rose by 0.9% year on year in October, the ONS said retail figures showed there were falls in average prices across all store types last month, except petrol stations.
But the drop in average store prices was the smallest for more than two years at 0.7% and will be taken as a further sign the UK’s long spell of very low inflation is coming to an end. The drop in sterling against other currencies since the Brexit vote has raised import costs to the UK and been passed on to consumers in the prices of household goods including Marmite.
That would make October’s “mini-boom” for retailers hard to repeat, said Chris Williamson, the chief business economist at IHS Markit.
“Such strong growth is clearly unsustainable, and cracks are in fact already appearing. Survey data highlight how households are struggling to support existing spending due to weak income growth and rising prices, and how this negative trend is likely to intensify in coming months,” he said.
