Surprise as August rain fails to dampen high street spending
Reports of the death of the consumer economy appeared unfounded yesterday after official figures revealed a sharp rise in high street spending last month.
Reports of the death of the consumer economy appeared unfounded yesterday after official figures revealed a sharp rise in high street spending last month.
The volume of goods passing through shops' checkouts rose 0.6 per cent in August, defying forecasts that a rain-sodden month would lead to a 0.3 per cent fall. John Butler, the UK economist at HSBC, asked: "Weakness, what weakness?Contrary to popular belief, the UK consumer is still willing to spend, spend and spend."
The Office for National Statistics said the annual growth rate in retail sales volumes rose to 6.5 per cent in August from July's 6.4 per cent.
The increase was led by a surge in clothing and footwear and electrical items with non-food stores generally posting robust annual growth of 8.5 per cent. While much of the growth was achieved by slashing prices, the value of spending also rose by 0.5 per cent on the month. Ross Walker, at Royal Bank of Scotland, said: "August's data are not just about price deflation. Demand is holding up reasonably well and consumers are still willing to part with their cash if the price is right."
Retail analysts said a strong month in June, when volumes rose 0.9 per cent, was a sign that the summer sales had come earlier than the traditional July start, which helped explain the bounce back in August.
The pound rose as analysts said the strength of the data challenged the view that the UK had hit the peak of the interest cycle at 4.75 per cent. A run of weak numbers on the retail and housing markets culminating in Halifax's report of a 0.6 per cent fall in house prices had prompted a number of analysts to question whether the Bank of England had finished raising rates.
Earlier this week Stephen Nickell, a member of the Bank's Monetary Policy Committee, triggered a drop in the pound by saying rates might not have to go up much further if the weakening trend continued. However, he also stressed that August's data were usually difficult to interpret.
The ONS said the figures showed a slowdown, pointing to a drop in the quarterly growth rate to 1.4 per cent, an 11-month low. The picture is also confused by surveys from the CBI and the British Retail Consortium, which point to the worst month for sales for a year in August.
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