Shock fall in UK retail sales leaves high street rattled
Storm clouds gathered on Britain's high street after a shock fall in retail sales and a slew of pessimistic comments from major players.
Figures from the Office for National Statistics (ONS) revealed a surprise sales fall of 0.5% in August, bringing to an end six months of growth, and signalling a turn for the worse in consumer spending.
Retail bellwether John Lewis and Comet parent Kesa Electricals joined a growing number of major players to flag concerns about the outlook, after fashion chain Next yesterday forecast a period of low growth.
The sector is bracing itself for fall-out from next month's Government spending review and the rise in VAT to 20% next January.
The figures from the ONS were described as "awful" by economist James Knightley at ING Bank, coming against market expectations for growth of 0.3%.
It was the worst retail sales result - and first fall - since January.
The ONS also revealed that sales growth in July was not as good as initially calculated, revising the result down to 0.8% from 1.1% previously.
Vicky Redwood at Capital Economics said: "August's fall in retail sales could be the first sign that the surprising resilience of consumer spending recently could be coming to an end." But she cautioned against reading too much into one month's results.
Three-month data from the ONS showed a rise of 1.4% on the previous quarter, while sales were still ahead year-on-year in August, up 0.4%.
In the month-on-month data, non-food stores were the worst hit, with sales down 0.7%, driven largely by household goods stores.
Food stores saw a decline of 0.5%, according to the ONS.
The sector has seen sales ease back after the World Cup boost in early summer trading, and as shoppers try to rein in their spending.
John Lewis reported a slowing in sales growth across its department stores to 8.8% in the six weeks since July 31, from 12.3% in the first half.
Charlie Mayfield, chairman of John Lewis Partnership, said: "For the remainder of this year and into 2011, we anticipate more challenging trading conditions as higher taxes and public spending cuts begin to bite, and household disposable incomes come under pressure."
However, the group remains confident it will continue to out-shine the market after a robust first half.
A public inquiry into its plans to build a store at Sprucefield near Lisburn begins next month.