UK retailers suffer worst October since 2008 - BRC

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By Andy Bruce

LONDON, Nov 7 (Reuters) - British shoppers cut back their

spending last month at the fastest pace for any October since

2008, a reminder of the strain on household budgets even before

the Bank of England raised interest rates, a survey showed on

Tuesday.

Retail sales declined by an annual 1.0 percent on a

like-for-like basis, which strips out changes in store size, the

British Retail Consortium (BRC (Shanghai: 600466.SS - news) ) said. Sales rose 1.9 percent in

September.

Payments company Barclaycard also reported weak

consumer spending, with a split between spending on essentials

and spending on discretionary items.

Last Thursday, the Bank of England raised interest rates for

the first time in more than 10 years, despite a slowdown in

economic growth this year .

Most economists polled by Reuters before the decision

thought raising rates would be a mistake, partly because of

fragile consumer finances, which have been under pressure from

weak wage growth and the rise in inflation since last year's

Brexit vote.

Governor Mark Carney has said the worst of the squeeze on

households is ending and the impact of the rate increase will

not be big for households, whose spending is the main driver of

Britain's economy.

But analysts were less sure in light of Tuesday's figures,

as well as a similar Confederation of British Industry survey

published last month, which showed sales plunged during October

at the fastest rate since 2009.

"The UK BRC Retail Sales make for rather depressing reading

... thus raising further questions about the wisdom of last

week's BoE (Shenzhen: 000725.SZ - news) rate hike, let alone the prospect of any follow-up,"

said Marc Ostwald, market strategist at ADM Investor Services.

The BRC said its figures were a cause for concern ahead of

the Christmas holidays. "The decline was driven by the worst

performance of non-food sales since our record began in January

2011," said Helen Dickinson, BRC's chief executive.

"The growth in food sales, meanwhile, adds some colour to

this otherwise anaemic picture, but these figures are very much

buoyed by inflation."

Consumer price inflation reached 3 percent in September, its

highest level in more than five years and above the BoE's 2

percent target. The central bank expects the consumer price

index to peak at 3.2 percent in October.

The BRC, whose figures are not seasonally adjusted, said

total sales last month edged up 0.2 percent, which was also the

weakest increase for any October since 2008.

Dickinson said the last week's rate hike - the first in more

than a decade - would add more pressure on household budgets.

The impact from the rise in borrowing costs on the housing

market looks much less marked, mortgage lender Halifax said as

it reported a pick-up in house prices in the three months to

October .

Barclaycard's measure of consumer spending growth eased to

2.4 percent year-on-year, compared with an increase of 3 percent

in September.

"In light of the Bank of England's announcement last week,

it'll be interesting to see how shoppers, who have so far

demonstrated their resilience, continue to juggle the many

demands on their budget," said Paul Lockstone, managing director

at Barclaycard.

(Editing by William Schombergk, Larry King)