September 20, 2018 / 8:35 AM / 3 months ago

UK shoppers keep on spending as August retail sales smash forecasts

LONDON (Reuters) - British shoppers kept up their strong summer spending spree in August and showed no sign that the approach of Brexit is making them cautious, official data showed on Thursday.

FILE PHOTO: Shoppers browse in an Aldi store in London, Britain, February 15, 2018. REUTERS/Peter Summers

In another sign that the country’s overall economy is on track for solid growth in the third quarter of 2018, retail sales jumped by 3.3 percent compared with August last year, stronger than all forecasts in a Reuters poll of economists.

That was slightly slower than an upwardly revised 3.8 percent leap in July but that jump was widely seen as a response to the soccer World Cup and soaring summer temperatures.

In monthly terms, sales rose by 0.3 percent in August from July, the Office for National Statistics said, defying the median forecast in the Reuters poll for a fall of 0.2 percent.

Looking at the three months to August as a whole, which smoothes out some monthly volatility, growth in sales slowed to 2.0 percent, down from 2.4 percent in July.

Britain’s consumers have helped lessen the hit to the overall economy from the 2016 Brexit vote with their spending, even as their purchasing power has been squeezed by high inflation and only slow growth in their wages.

Figures published on Wednesday showed inflation jumping to a six-month high of 2.7 percent in the 12 months to August.

Last week, surveys from the British Retail Consortium and Barclaycard suggested consumers had shifted some of their spending in August away from shops to pubs which saw an increase in takings.

While consumers have largely defied the pinch on their spending power, high street retailers have had to resort to steep discounts.

The ONS said sales in August were boosted by shops offering promotions on household goods such as furniture and electrical appliances while food sales and clothing fell compared with July.

Britain’s biggest retailer Tesco (TSCO.L) launched a new grocery store brand on Wednesday to compete with fast-growing German discounters Aldi and Lidl on price.

Clothing retail French Connection said on Thursday it expected to close eight more stores in 2018 and it had reviewed lease contracts of other loss-making stores, citing the deterioration of trading conditions on the high street.

The sector is grappling with the shift to online spending. Thursday’s figures showed online spending accounted for a record 18.2 percent of all retailing in August.

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