UK retail sales grew rapidly in October as consumers — yet to experience the impact of the weaker currency — continued to spend and colder weather boosted clothing sales.
The seasonally adjusted volume of sales was 1.9 per cent higher in October than in September, the Office for National Statistics said on Thursday. Sales were boosted by strong growth in clothing and footwear as the end of unusually mild Autumn weather encouraged people to invest in new winter clothing. Total sales volumes were 7.4 per cent higher than the same month a year ago.
The growth in sales was far higher than most analysts had been expecting. On average, forecasters had predicted retail sales would grow by 0.4 per cent in October compared with September, and by 5.3 per cent compared with October 2015.
Kate Davies, ONS senior statistician, said: “The strong figures this month have been boosted by several factors. Cooler temperatures in October boosted clothing sales as shoppers took their cue to purchase winter clothing, while the supermarkets benefited from Halloween. This has also coincided with the strongest growth in internet sales seen for five years.”
Consumer spending has been resilient since the UK voted to leave the EU, defying initial expectations from the Bank of England and other forecasters. The buoyant mood among consumers is in contrast to an apparent belief among financial market participants that the UK economy will be permanently weakened by Brexit.
The Bank of England’s latest inflation report concluded that “ultimately, the tension between consumer strength on the one hand and the more pessimistic expectations of markets on the other will be resolved”. The Monetary Policy Committee thinks this will happen through household consumption starting to slow as inflation picks up next year thanks in part to the weaker pound.
Sterling has lost a fifth of its value over the past year, including a sharp fall since the EU referendum. However, figures published on Tuesday by the ONS suggested this has not yet fed through into sharply rising consumer prices. Consumer prices were just 0.9 per cent higher in October than the same month a year ago.
However, Mike Prestwood, ONS head of inflation said: “After initially pushing up the prices of raw materials, the recent fall in the value of the pound is now starting to boost the price of goods leaving factories as well.” Most forecasters believe it is only a matter of time before retailers start to pass these higher costs on to consumers.