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Retail sales in August ‘blow forecasts out of the water’

Written by: Paloma Kubiak
Retail sales for August defied expectations, rising 1% on the month as consumers increased spending on non-essential goods.

The Office for National Statistics (ONS) revealed retail sales increased by 1% compared with July, and by 2.4% compared to August 2016. This is the 52nd consecutive month of year-on-year increases in retail sales.

Increased spending on non-essentials – including department stores and DIY outlets – were behind the big rise. And this is despite non-food store retailing having recorded their highest year-on-year price growth since March 1992, at 3.2%, which reflect the wider inflationary pressures, the ONS said.

Sterling jumped sharply on the news, gaining three-quarters of a cent against the dollar and half a cent against the euro.

Ben Brettell, senior economist at Hargreaves Lansdown, said: “The UK consumer continues to show remarkable resilience, with retail sales in August blowing economists’ forecasts out of the water. It currently seems to be holding up despite weak wage growth and above-target inflation. This could bode well for economic growth – the UK economy is heavily reliant on the consumer, and economists had expected falling real incomes to eventually translate into weak retail sales.

“If this fails to materialise the economy could see a stronger second half to the year – though there are also growing concerns over the level of household debt, which is fuelling continued consumption in the absence of rising real wages.”

Alex Marsh, managing director of Close Brothers Retail Finance, said although overall retail spending was up, August saw a lull in big ticket spending driven by people going on summer holidays and spending on experiences over items. He said it remains a challenge for retailers to get shoppers through the door and onto their websites, and they now need to be aware of the effects of prolonged inflation.

“Retailers need to prepare for the squeeze on consumer spending and consider offering consumers flexible payment options such as the ability to spread the cost of purchase. This will ensure retailers are in a position to thrive and not just survive in these uncertain times,” he said.

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