British retail sales volumes fell in September and the annual rate of growth slowed to its weakest in two-and-a-half years, official data showed today, showing consumers struggling as the economy slows.
The Office for National Statistics said sales fell 0.4 per cent last month, after a revised 1.1 per cent gain in August, taking the annual rate down to 1.8 per cent from 3.3 per cent, the weakest since February 2006.
Analysts had expected a monthly fall of 0.9 per cent and an annual rate of 2.0 per cent growth.
The official data has been surprisingly resilient this year given weak readings in other monthly surveys and gloomy news from retailers. Today's figures may indicate that official numbers are starting to catch up and reflect tougher conditions.
"I'm still surprised retail sales are holding up so well, at least on official figures. I wouldn't be surprised to see them weaken further up to Christmas," said George Buckley, UK economist at Deutsche Bank.
The global financial crisis has driven Britain to the brink of its first recession since the early 1990s, with tighter credit, soaring living costs and rising unemployment piling the pressure on households.
Economists expect the Bank of England to repeat this month's 50-basis-point cut in borrowing costs next month and some see rates falling below 3 percent next year from 4.5 per cent.
Separate figures showed net mortgage lending in Britain rose by 3£.6 billion in September, a bigger rise than the month before but still below the 6-month average.
The British Bankers' Association data said approvals for new home purchases totalled 23,422, up from August but still 56.6 per cent lower on the year. Consumer credit was also subdued, rising by just £100 million.
The ONS, which warns that monthly sales rates are volatile, said the underlying trend in retail sales volume was of a slowing in activity and negligible growth in the most recent period.
It said September's fall was driven by weakness in clothing and household goods sales. Textile, clothing and footwear sales fell 2.3 per cent in September, while sales of household goods slipped 2.0 percent on the month.
Nonetheless, retailers put up their prices last month, with the deflator rising to 1.0 per cent on the year from 0.9 per cent in August.
Reuters