Belfast Telegraph

Retail sales slip into reverse

By Alistair Dawber

Retail sales figures became the latest indicators that the economic recovery is slowing yesterday when the Office for National Statistics revealed a surprise fall in high street spending.

The ONS said that retail sales dropped by 5 per cent during August, the first time they had fallen since January. The City had been expecting growth of 0.3 per cent, according to the respected Centre for Economics and Business Research.

In the broader, three-month measurement to the end of August, which is preferred by the Treasury, retail sales were more encouraging, showing a rise of 1.4 per cent compared with the three months to the end of July.

A spokeswoman for the Conservative Party said: "The Treasury cautioned against reading too much into monthly figures and pointed to the growth in the most recent three months on the previous three months."

But the monthly figures follow a series of downbeat economic numbers already published this week. On Wednesday the ONS reported the first rise in the number of people claiming unemployment benefit since the start of the year. This followed the August house-price survey from the Royal Institution of Chartered Surveyors on Monday, which showed a larger-than-expected drop. Analysts said the data indicates that confidence in the economic recovery is ebbing away.

"The unexpected 0.5 per cent fall in retail sales in August is a nasty shock and deals a significant blow to growth hopes," said Howard Archer, the chief economist at IHS Global Insight. "Indeed, it will probably fuel fears of a double dip, given the importance of consumer spending to the economy and the fact that the fall in sales was broad based in August."

A host of retailers have warned that conditions are expected to get tougher towards the end of the year, after the Chancellor spells out the details of the Government's huge public spending cuts. George Osborne will outline his plans in the Comprehensive Spending Review next month, which will almost certainly lead to thousands of public sector job losses. January's VAT rise, from 17.5 per cent to 20 per cent, is also expected to knock retail sales. But there were mixed signals from the retail sector yesterday, as three of the UK's biggest groups – the John Lewis Partnership, B&Q owner Kingfisher and Kesa Electricals, which runs Comet – all reported upbeat profit figures yesterday. The companies did, however, join those warning of tougher times ahead on the high street.

The confused retail picture was mirrored in other sectors. A CBI report into expectations in the manufacturing industry showed that confidence was high, even though the gap had narrowed between the number of companies expecting higher orders and the number expecting orders to decline.

Overall, though, the latest Industrial Trends Survey found that the number of companies with a positive outlook is well above the longer-term average, and ahead of the survey's findings earlier this year.

Belfast Telegraph