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UK retail sales enjoy strongest quarter since late 2014, warm weather hurts clothing – ONS

British retail sales recorded their strongest quarter of growth since late 2014 in the three months to September, but warm weather and higher prices dented demand for new clothing towards the end of the period.

Britain’s statistics agency said consumer sentiment had remained firm since June’s vote to leave the European Union, and that the sector would make a robust contribution to economic growth during the third quarter.

“The underlying trend is one of strength, suggesting consumer confidence has remained steady since June’s referendum,” statistician Kate Davies from the Office for National Statistics said.

In the three months to September, retail sales volumes grew by 1.8 percent on the quarter, the fastest rate since the fourth quarter of 2014 and up from 1.1 percent in the three months to June.

Compared with a year earlier, third-quarter sales volumes were 5.4 percent higher, again the strongest calendar quarter since Q4 2014.

But in September alone they disappointed economists’ forecasts in a Reuters poll for a 0.4 percent rise, as there was zero growth. This, however, followed an upward revision to August’s numbers to show sales held steady, rather than fell.

The ONS said the biggest monthly falls in sales were for clothing and footwear, which also dropped sharply in August. Higher prices, and unusually warm September weather which dented the demand for new autumn ranges, were behind the fall, it said.

Figures on Tuesday had shown the biggest monthly jump in clothing prices in several years in September, and the retail sales data showed the smallest drop in stores’ prices in just over two years.

Economists are concerned this marks the start of a longer-term trend of rising prices which will eat into consumer demand, after sterling fell more than 15 percent following June’s referendum.

Britain’s biggest supermarket, Tesco, had a standoff with consumer goods manufacturer Unilever this month after the latter tried to raise its prices by 10 percent across the board to preserve its profit margins.

A survey of households on Wednesday showed the greatest concern about price rises in nearly two years, and official data on Tuesday showed the biggest monthly increase in the inflation rate since June 2014.

Britain’s biggest supplier of building materials, Travis Perkins, said on Wednesday that weak demand after the Brexit vote would cause it to miss profit targets and clothing chains such as ASOS, Next and Marks & Spencer are struggling to grow sales.

Britain’s economy expanded by 0.7 percent in the three months to June, but the Bank of England expects this to slow to 0.3 percent in the current quarter.

This is a smaller decline than most economists expected just after the Brexit vote and few now expect the BoE to follow through with another rate cut next month after it cut rates to a record low 0.25 percent in August.

(Reporting by David Milliken and Andy Bruce)

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