UK retail sales declined the most in six months in September as high inflation squeezed household spending amid subdued wage growth.
Retail sales including auto fuel dropped 0.8 percent month-on-month in September, reversing a 0.9 percent rise in August, figures from the Office for National Statistics revealed Thursday.
This was the first fall in four months and the biggest since March. Sales were forecast to drop marginally by 0.2 percent.
Likewise, retail sales volume excluding auto fuel slid 0.7 percent, in contrast to August's 0.9 percent increase. Economists had forecast a 0.1 percent fall for September.
Non-food store sales provided the greatest downward pressure, by falling 1.5 percent. At the same time, food-store sales decreased 0.6 percent.
On a year-on-year basis, growth in retail sales, including auto fuel, slowed to 1.2 percent in September from 2.3 percent in August. This was also weaker than the expected 2.1 percent.
Excluding auto fuel, retail sales climbed 1.6 percent, which was slower than the 2.6 percent increase seen in August. The expected growth rate was 2.2 percent.
In the third quarter, retail sales grew 1.5 percent, the lowest pace since the second quarter of 2013.
Household spending growth probably registered a small pick-up in the third quarter, from the second quarter's 0.2 percent rate, which should have helped the economy to re-accelerate a little, Ruth Gregory, an economist at Capital Economics, said.
James Smith, an ING Bank economist, said a drop in retail sales emphasizes the fragile nature of the UK consumer spending.
With inflation likely to stay up around 3 percent for the next few months, albeit set to peak in October, and wage growth set to hover just above 2 percent in the medium-term, the pressure on household budgets is unlikely to dissipate for at least a couple more quarter, Smith added.
by RTT Staff Writer
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