British retail sales volumes fell last month for the first time since January, a sign that consumer demand may be slipping ahead of planned government spending cuts.
The Office for National Statistics said sales volumes fell 0.5 per cent in August, surprising analysts who had forecast a modest increase and backtracking after several months of resilient growth.
On the year, retail sales volumes rose just 0.4 per cent - only a fifth of the 2.0 per cent that analysts had forecast.
Sterling hit session lows against the euro and the dollar after the report, which also showed hefty downward revisions to July's figures.
"August's fall in retail sales could be the first sign that the surprising resilience of consumer spending could be coming to an end," said Vicky Redwood at Capital Economics. "The pressures on consumers are clearly mounting."
Although results of UK retailers have generally started to improve following the recession, many experts think the sector faces a harsh winter as the government cuts spending and raises taxes to rein in a record public deficit.
Bellwether British retailer John Lewis said trading conditions would likely get tougher as tax hikes and public spending cuts hit shoppers, as it reported a 28 per cent rise in first-half profit.
Kingfisher, Europe's biggest home improvement retailer, beat first-half profit forecasts, helped by cost-cutting and business improvements. But it too saw tougher times ahead.
Analysts expect the UK economy to outgrow the euro zone next year, but the recovery remains fragile and subject to concerns over the impact of the budget cuts, due to be announced in detail next month.
Today's release revised down July's monthly growth to 0.8 percent from the 1.1 per cent initially reported. The statistics office said the revisions were amplified by its annual rebasing of the sales index as well as a seasonal adjustment review.
Falls in sales volumes in August were broad-based, with food, fuel, clothing and household goods all suffering a setback.
One bright spot for the Bank of England policymakers - most of whom have so far played down concerns about continued above-target inflation - was a fall in the retail sales deflator to 1.5 per cent, its lowest since November.
Reuters