UK retail sales drop sharply

UK retail sales dropped sharply in September despite an underlying trend of steady growth in the face of rising prices, figures show.

There was an unexpectedly sharp fall of 0.8% last month, reversing a surge in August, according to the Office for National Statistics (ONS).

The quantity bought in Britain's retail sector rose 1.2% in September from the same month in 2016, down from 2.3% growth in the year to August and well below the expected 2.3%, ONS data showed.

However, the ONS said the underlying retail pattern was one of growth, with the three-month measure showing sales were up 0.6%.

Monthly figures showed sales fell 0.8%, with non-food stores having the most impact on the drop.

ONS senior statistician Kate Davies said: "September's retail sales saw a monthly decline of 0.8%, reversing August's growth.

"However, there is a continuation of the underlying trend of steady growth in sales volumes following a weak start to the year, and a background of generally rising prices.

"These increased costs are reflected in the more rapid growth in the amount spent when compared with the quantity bought."

Store prices continue to rise across all store types and are at their highest year-on-year price growth since March 2012 at 3.3%, the ONS said.

Online sales values increased year-on-year by 14%, accounting for approximately 17% of all retail spending.

Ian Gilmartin, head of retail and wholesale at Barclays Corporate Banking, said: "It's important to avoid overstating the negatives in September's retail sales, as retailers did manage to post year-on-year growth despite the range of headwinds they are battling currently.

"However, sales were down compared to a month earlier, with the expected dip following August's strong result worse than predicted.

"Footfall struggled, in part due to a wetter-than-usual September, with continued double digit increases in online sales coming to the rescue."

Ian Geddes, head of retail at Deloitte, said: "Against a well-documented backdrop of rising inflation, increasing levels of debt and fragile consumer confidence, the retail industry will have been looking forward to entering the final three months of the year - typically a crucial trading period that encompasses both Black Friday and the Christmas shopping periods.

"However, the prospect of the Bank of England raising interest rates for the first time in over 10 years next month could come at a challenging time for the retail sector.

"Issues around consumer finances, spending power and rising cost pressures are already challenging the industry: an interest rate rise could cause an additional headache for retailers in the lead-up to Christmas."