Output grows as retail sales start to slow

RETAIL sales suffered a surprise drop of 0.5 per cent in August, but manufacturers
remained upbeat about demand for next month, official figures from the Office of National Statistics (ONS) and the CBI respectively showed yesterday.

The fall in retail sales was the first in over six months when the unusually cold winter put
shoppers off going to the high street. The numbers came as a surprise largely because July had seen such strong positive sales growth of 0.8 per cent. Analysts had been expecting growth of 0.3 per cent.

The reversal saw sales volumes fall most for non-food retailers, down 0.7 per cent compared to food chains which saw sales drop 0.5 per cent.

While the monthly decrease was comparatively sharp, sales were still 0.4 per cent higher
than in August 2009. Meanwhile, sales volumes for the three months to August increased by 1.4 per cent compared to the previous three months, largely led by non-food stores

Opinions among retailers are divided with some concerned government spending cuts could threaten confidence and the traditional Christmas shopping boom. Others believe the impending VAT rise proposed for January could lead to a spending spree on the high street before prices go up on 1 January.

However, the coalition government

cautioned against reading too much into one set of of monthly figures.?A Treasury
official pointed out that the most recent three month figures indicated growth.

Meanwhile the closely-watched CBI industrial trends survey was more upbeat. It found that 23 per cent of firms reported higher-than-normal export orders, against 27 per cent who reported lower-than-normal orders. The resulting balance of -5 per cent was weaker than in August but still much higher than recent averages and reflects a much better outlook than at the start of the year.