Retail sales rise more than expected

Shoppers bought an unexpectedly large amount of goods on the high street last month, according to official figures, though spending over the past three months has been weak overall.

The volume of retail sales excluding petrol rose 0.7 per cent between August and September, surprising economists who expected sales to rise 0.2 per cent. However, the figures for the previous month were revised downwards. Over the three months to September, volume sales were 0.1 per cent lower than the three months to June.

David Kern, chief economist at the British Chambers of Commerce, the business lobby group, said: “While the figures confirm the squeeze on disposable incomes precludes significant growth in consumer spending, they do not support fears of an imminent recession.”

The value of retail sales – the amount of money people are actually spending in the shops – was 5.4 per cent higher in September than the same month a year ago, while the volume of sales was just 0.6 per cent higher.

“Contrary to popular wisdom, consumers are spending money – it’s just that the inflation overshoot means their money is buying them fewer goods,” Ross Walker, an economist at RBS, said.

This trend is most evident in the food sector: people spent 5.7 per cent more on food than the same month a year ago, although the volume of food they bought declined slightly. According to the Office of National Statistics, 42 pence in every pound spent in the shops goes on food.

There was a sharp rise in sales in electrical goods stores compared with a year ago, which the Office of National Statistics attributed to people buying computers for school, college and university.

However, the volume of clothing and footwear sales fell 2.1 per cent from the same month a year ago, the biggest drop since April 2008.

“Faced with depressed domestic demand, retailers have not succeeded in boosting sales significantly even as discounts have become more frequent,” Blerina Uruci at Barclays Capital said.

Separately, the Council of Mortgage Lenders said that gross mortgage lending rose last month compared with the same period a year ago. Gross mortgage lending was an estimated £12.9bn in September, slightly less than the £13.1bn lent in August but 4 per cent higher than in September last year.

Bob Pannell, CML’s economist, said: “Both house purchase and remortgage lending appear to have fared well in September, but this is against the backdrop of subdued levels of activity.”

Source : Sarah O’Connor – Financial Times
www.ft.com/cms/s/0/e7964482-fb05-11e0-bebe-00144feab49a.html#axzz1bFo3nSI1