Retail sales in the UK posted a shock drop in October after shoppers cut back on food and clothing purchases ahead of Christmas putting the country’s economic recovery in doubt.
The sale of fuel dropped by 0.8%, food which accounts for 41% of all retail sales sell by 0.6% and clothing dropped sharply by 2.3% in October. Clothing is thought to account for about 12% of total retail sales. In September the figure had shown an increase of 1.9% after being buoyed by the sale of school uniforms as the nation’s children went back to school. The numbers are the weakest since April and worse than economic forecasts.
“I think a contraction in GDP is on the cards for the fourth quarter,” said Rob Wood, economist at Berenberg Bank.
“Retail sales had improved through 2012 as the fall in inflation eased the squeeze on households, but as inflation goes up that puts the brakes on retail sales for now.”
Sterling fell against the dollar and the euro after the release clouded the growth outlook for the economy.
The decline is being blamed on Britons suffering the biggest decline in their incomes for more than 30 years. Soaring food and fuel prices, as well as rocketing energy bills and tax hikes has voided the paltry pay rises received by most workers. A five-month high in British inflation has lessened the chance of a revival in consumer spending as wages fail to keep up.
Many retailers are hopeful that the vital Christmas trading period can turn the figures about, with department store John Lewis already saying that Christmas trade has had a strong start. Retailers are expecting an increase of sales by the end of November.
In a more positive sign for the UK economy, car manufacturing is reported to grown by 6.4% in October, taking the total rise up to 8.4% in the proceeding ten months of 2012.
The Pound to Euro exchange rate is currently trading at 1.2449
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The Euro to US Dollar exchange rate is currently trading at 1.2745
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