Shock fall in September retail sales

THE high street suffered a shock fall in retail sales last month, raising fears that consumer spending is slowing even before the austerity measures really begin to bite.

Headline retail sales fell by 0.2 per cent for a second consecutive month in September after a downwardly-revised drop of 0.7 per cent in August. Economists had expected a rise of 0.3 per cent.

On a quarterly basis, sales grew by one per cent in the third quarter but this was less than the 1.5 per cent growth seen in the three months to August. This slowing underlying trend has primarily been driven by weaker food sales with quarterly food store sales volume contracting by -1.1 per cent in September.

In annualised terms retail sales growth was a pedestrian 0.5 per cent, although if you strip out auto fuel it was 1.8 per cent. “That is pretty slow – not surprising when earnings growth is not keeping pace with inflation and a double-dip in the housing market has probably sapped confidence,” said BNP Paribas’ Alan Clarke.

The largest fall in core sales last month was in textiles and clothing, which dropped by 0.8 per cent on the month following a 0.7 per cent fall in August.

Andrew Goodwin, senior economic adviser to the Ernst & Young ITEM Club, said: “It is a picture of consumer demand stagnating through the middle of this year. In fact sales levels are barely higher than this time last year and that comes as little surprise given how weak the fundamentals are right now.”

“The outlook remains pretty bleak for consumers. The final few months of the year might look artificially good if January’s VAT rise encourages consumers to bring forward their purchases of big-ticket items. But after that consumer demand is likely to remain soft with numerous headwinds buffeting households,” Goodwin added.