UK retail sales disappoint in October but retailers say it's just a blip

High street sales disappointed in October as the CBI distributive trades survey number comes in at 2 - the lowest number since June - missing expectations it'd fall slightly to 33 from last month's 34.

Sales were flat in the year to October, too, dashing hopes of another solid rise. Robust growth is expected to return next month, though, the CBI said today, as retailers seem to believe it is a temporary blip - 23 per cent expect sales to be up year-on-year in November.

Howard Archer, chief UK and European economist at IHS Economics comments that the survey's results indicate consumers are taking at least a "temporary breather in their spending" following the vigorous rate of spending during the third quarter.

Wholesalers saw sales growth continuing in line with expectations, albeit at a slower pace, and sales in the motor trade sector soared, up by 94 per cent.

Whilst 42 per cent of the survey's 125 respondents reported sales volumes were up on a year ago, 39 per cent said thet were down, giving the two per cent balance, and suggesting a loss of momentum for most sectors.

Grocers saw a 17 per cent fall in sales - the first year-on-year decline in eight months. Footwear and leather, and chemists performed strongly (up 37 per cent and 67 per cent respectively).

In terms of orders, October saw numbers up 12 per cent - the fourth consecutive month of modest growth.

Archer says:

The survey fuels suspicion that GDP growth is likely to moderate in the fourth quarter from the robust 0.8% quarter-on-quarter expansion seen in the third quarter

With purchasing power currently being limited by consumer price inflation running well above earnings growth, it is likely that many people are feeling the need to rein in their spending at least temporarily, particularly if they want to build up their funds for spending over the Christmas period.

The key question is whether this is just consumers taking a breather before Christmas or the beginning of a significant period of consumer retrenchment?