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UK retail sales stagnated in September after falling the previous month, adding to concerns about the resilience of consumer spending.
Official data showed the quantity of goods bought was unchanged month on month, leaving sales volumes in the three months to September up a modest 0.6 per cent on the previous three month period.
Consumer spending has been the main driver of UK economic growth over the past year, and policymakers are on the alert for signs of weak business confidence spreading to the household sector.
The Office for National Statistics noted that people seemed to have bought fewer non-essential items in the past month, with almost all areas of non-food retail reporting falling sales on the less volatile, three-month-on-three-month measure.
Retail sales inflation dropped from 0.6 per cent to 0.3 per cent, its lowest rate since April, suggesting that retailers felt it necessary to keep prices low to lure buyers.
Nonetheless, September’s performance was stronger than analysts had anticipated, given the much more gloomy surveys published recently by the British Retail Consortium and CBI employers’ group.
Ruth Gregory, at the consultancy Capital Economics, noted that much of the recent weakness was due to a surprisingly sharp fall in fuel sales: excluding this, sales volumes grew 0.2 per cent month on month in September, with little sign of any Brexit-related stockpiling providing an artificial boost.
She said this was consistent with a steady quarterly growth rate of 0.4 per cent in overall consumption, of which retail sales are only a component.
The year-on-year growth rate in retail sales remains robust, with the quantity of goods bought in September 3.1 per cent higher than a year earlier, reflecting growth in all sectors except for department stores and household goods.
Despite the troubles of many high street chains, the broader retail sector has been supported by the strength of the UK labour market, with employment close to record highs and real wage growth boosting household incomes.
Data released earlier this week suggested the labour market might now be on the turn, with unemployment edging up, employment falling and wage growth slackening.
But Kallum Pickering, economist at Berenberg, argued that households were still reporting solid finances, helped by easy credit conditions. The fact that measures of consumer confidence had been falling while wage growth accelerated “refects the risks to the economic outlook”, he added.
A quarterly survey of lenders, published on Thursday by the Bank of England, illustrated the more acute lack of confidence among businesses.
Banks reported falling demand for loans to fund corporate acquisitions, capital investment and commercial real estate from businesses of all sizes. The only area in which lenders expected corporate credit demand to increase was inventory finance — reflecting the strains Brexit-related stockpiling has placed on cash-constrained companies.
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