retail

UK retail sales drop unexpectedly in August

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UK retail sales fell in August as online shopping contracted, reversing the boost from major sales promotions in July and raising concerns about the resilience of consumer spending.

The volume of sales dropped 0.2 per cent compared with the previous month, the Office for National Statistics said on Thursday. Economists polled by Reuters had forecast no change. 

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Yet, an upward revision of July’s overall sales pushed the volume growth in the three months to August to a 0.6 per cent expansion compared with the previous three months, a marginal improvement from the three months to July, but well below the expansion seen in the first quarter. 

“Retail sales grew moderately in the three months to August with online sales still providing the biggest driver, despite falling back in the latest month,” said Rhian Murphy, head of retail sales at the ONS. 

A decline in online sales contributed the most to the fall in August, following the boost from Amazon Prime day in July. The contraction reverses the expansion in the previous two months.

August’s fall in retail sales “tempers third-quarter growth prospects given that consumers have been the strongest sector of the economy”, said Howard Archer, chief economic adviser at EY item club. In the second quarter, the UK economy contracted 0.2 per cent, raising fears of a recession, which is defined as two consecutive quarters of contraction. 

Moderate spending growth is in contrast with average earnings rising at a decade high and the proportion of people in employment reaching the highest rate ever recorded. However, consumer confidence has deteriorated in August as Brexit uncertainties intensified.

Beyond the volatility of internet sales, department stores recorded a largely persistent bleak picture. Not only did their sales fall 1.3 per cent in August compared with the previous month, but they also fell 0.3 per cent on the less volatile measures of the three months to August compared with the previous three months. 

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Department stores have not seen an expansion since the three months to August 2018 and they were the only sector to report lower sales in August than in the same month last year.

Separate data from John Lewis, a chain of mid-market department stores operating throughout the country, showed that their nominal sales were down 2 per cent so far this year compared with the same period last year. 

“The department stores’ performance remains difficult amid strong competition and challenging conditions, and they continue to markedly underperform the retail sector as a whole” said Mr Archer.

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