Buoyant high street spending is showing no signs of easing despite expectations that last month's terrorist attacks would dampen consumer confidence.
Retail sales dipped in the immediate aftermath of 11 September but had returned to pre-attack levels by the end of the month, the British Retail Consortium said yesterday. Consumers reacted to the atrocities by stockpiling food and drink, although sales of non-food items plunged.
Economists said low interest rates, the continuing strength of the housing market and the current low level of unemployment were maintaining consumer confidence despite the slowdown in some sectors of the economy, such as manufacturing, and, more recently, financial services.
Marks & Spencer, the troubled stalwart of the British high street, provided further evidence of the spending boom yesterday, unveiling its first quarterly increase in sales for three years, thanks to a long-awaited recovery in sales of womenswear. Shares in the company, already the best performer in the FTSE 100 index of blue chip stocks this year, climbed to a 20-month high.
There were, however, warnings that spending could slow in the next three months. John Butler, a UK economist at the City investment bank HSBC, said: "There are dark clouds on the horizon as the global slowdown knocks on to the domestic economy, eventually causing unemployment to rise. But consumer spending will only slow rather than stop and should continue to provide the key support to overall economic growth."
The Bank of England was unlikely to cut interest rates again until the beginning of next year, when unemployment was likely to rise more noticeably, Mr Butler said.
The BRC's study implies retail sales grew by 0.5 per cent in September, and is running at an annualised 6 per cent, compared with 4.8 per cent in the first half of this year. The official retail sales figures are published next Thursday.
The underlying rate of year-on-year sales growth accelerated from 5.6 per cent in August to 5.7 per cent in September, although economists put the bigger rise last month down to the dip in spending during the fuel crisis in the same period last year.Reuse content