Retail sales suggest UK economic growth to slow in the third quarter

Jessica Morris
Follow Jessica
Today's release adds to a string of weak economic data and surveys (Source: Getty)

UK retail sales inched up in August - having dipped a month earlier - but a lack of strength is leading analysts to warn that UK growth is hitting a "soft patch" in the third quarter.

Retail sales grew by just 0.2 per cent on a monthly basis, in line with expectations, according to the Office for National Statistics. The sector experienced a 3.7 per cent growth on the year, which was just above economists' forecasts for 3.6 per cent.

Sales of textiles, clothing and footwear jumped 2.3 per cent in August, and was up 1.9 percent from a year ago. The ONS said smaller stores had been helped by sales of school uniforms.

Sales at food stores slipped 0.9 per cent last month, posing the biggest drag on the overall retail sales figures. Year-on-year food sales rose 0.8 per cent.

Read more: Chile earthquake sends London copper up to two-month high

The UK economy has benefited from robust domestic demand - helped by low inflation and the return of wage growth - so far this year. But today's release adds to a recent string of data and surveys which suggest economic growth slowed in the third quarter. Manufacturing, construction and industrial production were also disappointing.

"Modest retail sales growth in August adds to the evidence that the economy has hit a soft patch in the third quarter," Howard Archer, chief economist at IHS, said.

"The sales data reinforce our belief that third-quarter gross domestic product growth is unlikely to come in any better than 0.5 per cent quarter-on-quarter, which would be down from expansion of 0.7 per cent quarter-on-quarter in the second quarter."

Read more: Four reasons why the Fed should not postpone a rate hike

Chris Williamson, chief economist at Markit, added: “The waning retail sales trend follows other data which point to a cooling in the pace of economic growth. Industrial production fell 0.4 per cent for a second successive month in July, and business surveys such as the PMI have indicated the weakest pace of economic growth for two years in August.

"Put all the information together and it’s pointing to the economy growing by 0.4 per cent in the third quarter, down from 0.7 per cent in the second quarter.

Related articles