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Retailers fear for festive season as sales fall

UK retail sales volumes tumbled 0.8% in October – their steepest monthly fall since April – according to official figures which fuelled fears about the health of the consumer ahead of the key festive trading period.

GLOOMY: Shoppers spent less in October on food, non-food and clothing items. Picture: Colin Mearns
GLOOMY: Shoppers spent less in October on food, non-food and clothing items. Picture: Colin Mearns

The grim, seasonally-adjusted retail sales figures from the Office for National Statistics (ONS) wrongfooted the City, which had expected volumes in October to be unchanged from September.

Non-food store sales, the more discretionary element of consumer spending, dropped 1% last month. Food store sales fell 0.6%.

Sales in the clothing, footwear and textiles category dropped by 2.3% during October. Sales in the "non-specialised" category, which takes in department stores, fell 0.7% last month.

Comparing the August to October period with the preceding three months, UK retail sales volumes were up just 0.2%.

The poor retail sales figures were published as data from the European Commission showed the 17-nation eurozone fell back into technical recession in the three months to September with a second consecutive quarter of contraction. The EC data showed eurozone gross domestic product fell 0.1% in the third quarter, having contracted 0.2% in the preceding three months.

UK gross domestic product rebounded by 1% in the three months to September, but this followed three consecutive quarters of significant decline.

And Bank of England Governor Sir Mervyn King warned on Wednesday that UK economic output "may shrink a little" in the current quarter.

Howard Archer, chief UK economist at consultancy IHS Global Insight, described the retail sales figures as "disappointing and worrying".

He said: "Retail sales fell back sharply in October, thereby dealing a serious blow to hopes that the economy can keep growing in the fourth quarter."

Noting a leap in annual UK consumer prices index inflation from 2.2% in September to 2.7% in October, and a slowdown in earnings growth, Mr Archer warned of "renewed pressure" on consumers' purchasing power.

He added: "It is also likely to limit the upside for personal expenditure for some time to come, many consumers need to deleverage (and) serious concerns and uncertainties persist over the domestic and global, particularly eurozone, economic outlook."

Samuel Tombs, UK economist at consultancy Capital Economics, said: "October's official retail sales figures support the timelier surveys in suggesting the recovery on the high street is losing momentum ahead of the crucial Christmas shopping season.

"The renewed pick-up in inflation, together with growing signs the resilience of employment is starting to fade, mean the backdrop for spending is not looking good ahead of Christmas."

He added: "The decline in October gets the fourth quarter off to a very weak start. For instance, sales would now need to rise by a very healthy 0.5% in both November and December to prevent sales from falling in the fourth quarter as a whole, compared with the third. More realistic average gains of 0.3% per month would lead to a 0.2% drop in sales in the fourth quarter."

An industry survey published this week showed the value of Scottish retail sales in October was down 1.3% on the same month of last year. The Scottish Retail Consortium survey indicates the sector continues to face tougher times north of the Border than in other parts of the UK.

A survey published earlier this month by the British Retail Consortium showed the value of UK retail sales in October was up 1.1% on the same month of last year. And October was the 19th consecutive month in which the year-on-year movement in retail sales value was poorer in Scotland than in the UK as a whole, on the basis of the SRC and BRC figures.

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