Friday 23 October 2020 7:58 am

UK retail sales smash expectations but analysts flag trouble ahead

UK retail sales rose well beyond expectations in September, with Britons buying 1.5 per cent more goods than a month earlier as they stocked up on food and turned to online retailers.

The 1.5 per cent growth was much better than economists had expected. It also beat the 0.6 per cent expansion in sales in August, the Office for National Statistics (ONS) said.

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However, analysts warned that the sector faces a difficult winter. Rising coronavirus cases and the new restrictions are set to knock consumer spending.

And the end of the furlough scheme in October is likely to cause a strong rise in unemployment, economists say.

In the three months to September, retail sales volumes jumped by 17.4 per cent compared with the previous three months. That was the biggest quarterly rise on record.

It meant retail sales were 4.7 per cent higher than a year earlier in September. And it also meant they were 5.5 per cent higher than their pre-pandemic level in February.

“Food stores and online retailers have fared particularly well in recent months,” said Jonathan Athow, deputy national statistician at the ONS.

“And most other store types have now recovered to pre-pandemic levels too after being subject to temporary closures during restrictions in the spring. 

“Spending on home improvement and gardening items in particular have boosted sales.”

Online retail sales grow strongly

Over the February to September period, non-store retailers did the best, with 4.2 per cent growth in sales. The category includes online shopping, mail-order, or other purchases not in person.

Sales in food stores came second, growing 1.4 per cent as opportunities to eat out were limited.

Fuel sales fared the worst, slipping 0.9 per cent from February to September, as people were kept from travelling.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the figures were “probably this year’s peak, given the outlook for falling incomes and renewed lockdowns”.

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Thomas Pugh, UK economist at Capital Economics, said: “Total consumer spending will probably start to stutter over the next few months as the furlough scheme ends and unemployment rises.”

He said this was “despite the increased generosity of the job support scheme” which chancellor Rishi Sunak announced yesterday.