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Business News

Retail sales fall as hard-hit shoppers rein in spending


Britons eased back on the barbecues last month after a glorious July, sending retail sales skidding lower for the first time since April today.

Official figures showed overall retails volumes dropped 0.9 per cent in August - a much sharper fall than expected - with a 2.7 per cent drop in food sales the main culprit behind the decline.

July's sales roared 1.1 per cent higher as a combination of sporting success, a heatwave and a royal baby boosted the feel-good factor. But consumers reined in after the spree as spending returned to normal levels, the Office for National Statistics said.

Jeremy Cook, chief economist at foreign exchange firm World First, said: "Sales were boosted in the summer as a result of the amazing weather, but, as all those who run a house will know, money doesn't grow on trees. The summer demand will have dragged forward from future months and consumers are likely to tighten purse strings throughout the rest of the year."

The fall in sales marks the first disappointing economic news for some time amid faster-than-expected growth for the economy, rising house prices and strong survey evidence from Britain's builders, manufacturers and construction firms.

ING Bank's James Knightley said: "If you strip out the volatile food component then sales were actually up 0.4 per cent. It is a disappointing outcome... but the underlying story still looks good with sales growth still up 1.7 per cent, consumer confidence rising, employment increasing and credit availability improving."   

The economy is expected to pick up pace in the current quarter from the 0.7 per cent seen between April and June, but wages are still lingering behind inflation, currently at 2.7 per cent.