Jump in retail sales surprises analysts

Uplift in sales confounds analysts – and raises retailers' hopes for Christmas.

Retailers preparing for a dour Christmas could find the pleasant prospect of queues outside their shops if a surprise jump in sales last month continues through the festive season.

Retail sales volumes rose by a greater than expected 0.6% in October, the Office for National Statistics said on Thursday, confounding analysts who expected sales to flatline along with the rest of the economy.

The uplift comes after a similar rise in September when a rush of back-to-school and university purchases also pushed up volumes by 0.6% month-on-month.

The second straight rise after a fall in August will encourage retailers who feared the government's austerity measures and the uncertainty around the ongoing eurozone debt crisis would keep shoppers at home this Christmas.

Huge price rises in gas and electricity and the continuing high cost of petrol at the pumps was also expected to force shoppers to cut back.

The rise follows a similar trend in the US, which has seen consumers dip into their savings to maintain their standard of living.

Thursday's retail sales figures contrast sharply with the latest survey of consumer sentiment by the Nationwide building society that found confidence at a record low. Not since 2004 when the survey began had consumers been so gloomy about the prospects for the economy, the Nationwide said.

The ONS said sales at food stores rose by 0.6% on the previous month, while non-food sales rose by a robust 0.9% after a 1.2% month-on-month rise in September

Sales of clothing and footwear advanced by 0.5% after falling for three consecutive months, the statistics body said.

City analysts Newedge Strategy said: "Today's retail sales data certainly bode well for fourth-quarter personal spending. However, we would not read too much out of the data as they clearly diverge from the overall picture. Indeed, the general outlook is set to remain sluggish.

"The CBI and British Retail Consortium surveys pointed to weak retail activity in October and consumer confidence currently flirts with recessionary levels. This morning's Nationwide consumer confidence index showed a considerable deterioration in households' sentiment that dropped to a record low since the series started in 2004.

"Worries about spill-over effects from the EMU debt and banking crisis led to panic in October as uncertainties prevailed and households felt the pressure of a prolonged period of stagnation. Not a supportive environment for solid activity, especially if we consider the considerable pressure on households' disposable income."

French Connection, the fashion chain, warned on Thursday morning that it would not meet its profit targets for this year. It blamed the weak economy, saying: "The UK fashion shopper continues to act very cautiously."

Source : Phillip Inman – The Guardian
www.guardian.co.uk/business/2011/nov/17/retail-sales-surprise-jump-christmas?newsfeed=true