Curbed spending by UK shoppers ends growth

Shoppers reined in their spending this month to leave retail sales broadly flat and bring a three-month growth spurt to an end

Shoppers on Northumberland Street in Newcastle
Shoppers on Northumberland Street in Newcastle

Shoppers reined in their spending this month to leave retail sales broadly flat and bring a three-month growth spurt to an end.

Falling sales at supermarkets weighed heavily on the sector, although rising demand for furniture, carpets and footwear pointed to some recovery in consumer spending, the CBI’s distributive trades survey showed.

Stagnating retail sales surprised economists, who had only expected growth to moderate slightly, but some said a warmer-than-normal month may have meant shoppers delayed spending on winter clothing.

While 42% of retailers said sales volumes were up on a year earlier, 39% said they were down, to give a rounded balance of just 2%.

That was well below expectations for a 31% reading, and compared with September’s 15-month high of 34%.

Barry Williams, chair of the survey and chief merchandising officer for food at supermarket Asda, said retailers are optimistic it is just a “blip”.

The survey of 125 firms between September 25 and October 16 showed a balance of 23% expect volumes to grow next month.

Mr Williams said: “Although the high street recovery stalled this month, there is optimism that it was just a blip on the previous run of three months’ growth.

“Retailers expect sales to pick up next month and are upping orders with their suppliers.

“It’s encouraging to see that signs are pointing towards increased consumer confidence - backed up by continuing growth in certain areas such as furniture and carpets, recreational goods, footwear and leather.”

Britain’s recovering housing market, lifted by Government stimulus schemes, ensured another good month for furniture and carpet retailers, where a net 80% reported higher sales volumes.

Recreational goods retailers reported a positive balance of 67%, while footwear stores were up a net 37%.

But grocers’ sales volumes fell for the first time in eight months, with a net 17% drop, and most sectors saw a deterioration in growth.

A net 10% of clothing retailers saw volumes grow, ending three months of robust increases by fashion stores.

ING Bank economist James Knightley said the survey is “not as bad as it seems”, with the weather likely to have played a “strong role”.

He said: “October has been far warmer than usual and as such demand for autumn/winter clothing has been very weak.

“As temperatures drop we should see demand for these items strengthen.

“In any case consumer confidence continues to strengthen while the pick-up in the housing market appears to be supporting furniture and carpet sales.”

But IHS Global Insight economist Howard Archer said shoppers may be pausing for breath as they amass funds for the Christmas period.

He said: “The survey fuels suspicion that gross domestic product growth is likely to moderate in the fourth quarter from the robust 0.8% quarter-on-quarter expansion seen in the third quarter.”

The survey follows official figures from the Office for National Statistics, which showed a stronger-than-expected 0.6% increase in sales volumes in September on August - as rising furniture sales helped offset falling supermarket volumes.

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