London 2012 fails to give boost to retail spending

The Olympics may have lifted the country but not, it seems, the crucial retail sector. Sales in Britain's shops, excluding petrol, fell 0.3 per cent in August, the Office for National Statistics has said. This was roughly in line with most analysts' forecasts, but nevertheless is yet another sign of Britain's current economic woes.

Big-ticket items seem to have felt the brunt of the Olympics as shoppers stayed at home, with household goods shop sales falling 2.7 per cent on the month. Department stores also suffered a hefty sales drop of 0.7 per cent. But this was nothing compared to the fall in online sales of 6.7 per cent, with people choosing to watch the Olympics on television.

House hunters also appear to have put their searches on hold to watch the Olympics, according to the latest figures from the Council of Mortgage Lenders, which show home loans in August 4 per cent lower than a year ago. Car production also fell 8.0 per cent compared with August 2011, although volumes are often variable in August as manufacturers use the holiday period to carry out maintenance work.

But there was some cheer for food and sports retailers. Data from the credit card payment firm Visa showed that spending at sport stores was up more than 20 per cent year on year during August. The suspension of the Sunday trading laws during the Olympics, combined with a greater proportion of people eating at home to watch television, also proved a boon for supermarkets, with larger store food sales up 2 per cent.

But more than the Olympics was at play in August, as it seems retailers reversed previous price cuts, and as a result suffered at the tills.

News of a poor month on the high street will add to gloom surrounding the prospects of the economy bouncing back from recession in the third quarter. And it comes on the back of poor purchasing management data for the consumer sector last week.

However, it is not all bad news, with the CBI's monthly industrial trends survey showing that the total order-book balance rose this month to -8 from -21 in August, above expectations of a reading of minus -15.

The Institute of Chartered Accountants has forecast growth of just 0.9 per cent next year, which will further throw out the Government's attempts to narrow the deficit.