By William Schomberg
LONDON (Reuters) – British retail sales rose a weaker-than-expected 0.2% in November, according to official data that suggested consumers had overcome concerns about the new government’s first budget but contributed to signs of only a slow momentum in the economy.
A Reuters poll of economists had forecast a 0.5% monthly increase in sales volumes, after a 0.7% decline in October ahead of Finance Minister Rachel Reeves’ tax and spending plan.
The monthly sales increase was the first since August. But in the three months to November, volumes rose just 0.3%, the weakest performance since the three months to June, the Office for National Statistics said on Friday.
Previously released official data shows the UK economy shrank in September and October, the first consecutive contraction since the COVID-19 pandemic.
Much of the blame for the slowdown is due to concerns over Reeves’ Oct. 30 budget, which ultimately placed tax increases on employers rather than consumers.
Surveys show companies’ hiring plans have taken a hit since she announced 25 billion pounds ($31.3 billion) in higher social security contributions for companies.
The Bank of England said on Thursday the economy would show no growth in the final three months of 2024, but did not cut interest rates due to concerns about persistent inflation pressures.
“Overall, against the backdrop of recent weak activity data, today’s release could have been worse,” said Alex Kerr, economist at consultancy Capital Economics.
“As real incomes continue to grow and consumer confidence improves next year, we believe retail will help accelerate consumer spending growth.”
Pound sterling was little changed against the US dollar immediately after the figures.
Grocery store sales rose for the first time in three months, the ONS said.
Britain’s largest supermarket chains Tesco (OTC:) and Sainsbury (LON:)’s forecast strong Christmas sales.
But clothing stores again suffered a volume decline of 2.6% compared to October.
Sportswear and fashion groups JD (NASDAQ:) Sports and Frasers and discounter Poundland have all warned about the prospects. Footwear retailer Shoe Zone issued a profit warning on Wednesday, highlighting “very challenging market conditions” in the first half of December.
The ONS said November figures had been adjusted to take into account the Black Friday discount season which was largely outside the reporting period, but some retailers reported sales starting earlier.
The school holidays in England and Wales unusually fell in November this year, rather than October, but the data was not adjusted for the impact.
($1 = 0.7999 pounds)
