UK retail sales fell in August for the first time in three months as waning consumer confidence deterred spending and some stores lost business due to riots in London and other cities.
Sales including fuel declined 0.2 per cent from July, when they rose by the same amount, the Office for National Statistics said today in London. UK consumers are being squeezed by inflation at 4.5 per cent, almost twice the pace of wage growth.
"It doesn't surprise me that retail sales are in negative territory as household incomes aren't rising strongly enough," said Alan Clarke, an economist at Scotia Capital in London. "It's not going to be easy going."
An index of sentiment fell to minus 31 in August from minus 30 in July, according to GfK NOP, as Britons became more pessimistic about the economic outlook.
The Bank of England said in a report today that household inflation expectations climbed to their highest level in three years last month. Consumers questioned in August expected prices to increase 4.2 per cent over the next year, up from a reading of 3.9 per cent in May.
The pound rose against the dollar after the release of the reports.
The statistics office said some stores reported that they closed early for part of August after the worst riots in Britain since the 1980s, affecting sales. Other stores said they benefited as consumers shifted spending. The statistics office said it can't quantify the impact of the violence on sales.
The monthly drop in retail sales in August was led by department stores, down 0.8 per cent on the month, the most since February. Food sales fell 0.3 per cent, while sales at "other stores," which includes computers, telecoms, toys and books, slipped 0.4 per cent. Petrol sales fell 1.1 per cent.
John Lewis Partnership, the owner of the UK's largest department-store chain, said yesterday that first-half earnings fell 23 per cent on the cost of store openings and as it sought to match competitors' prices.
Today's data also showed that clothes sales rose 0.5 per cent, partly boosted by discounts and demand for school uniforms as the summer holidays ended.
Next, the UK's second-largest clothing retailer, raised its annual profit forecast yesterday and said 2012 may be less challenging.
Excluding fuel, retail sales fell -0.1 per cent in August on the month and on the year, the statistics office said.
The Bank of England held its key interest rate at 0.5 per cent and bond-purchase program at £200 billion pounds this month as officials resisted pressure to extend stimulus in the face of accelerating price growth.
Bloomberg
