December 16, 2010 / 9:36 AM / 10 years ago

Retail sales below forecast in November

LONDON (Reuters) - Retail sales slowed more than expected in November but upward revisions to the previous months meant that the broad picture of steady and unspectacular growth remained intact, official data showed on Thursday.

Christmas shoppers walk along Oxford Street in central London November 28, 2010 REUTERS/Paul Hackett

The Office for National Statistics said sales volumes including motor fuel rose 0.3 percent last month, as purchases of toys, sporting goods and jewellery offset weak demand for furniture and other housing market-related goods. Analysts had forecast growth of 0.4 percent.

Data for the previous two months, however, were revised up and so the annual rate of sales growth picked up to 1.1 percent, the strongest since July, from 0.3 percent in October and compared with forecasts of 0.7 percent.

Sterling rose around a quarter of a cent on the news.

“The overall impression is that retail sales were reasonable but unspectacular ahead of the key Christmas shopping period,” said Howard Archer, economist at IHS Global Insight.

But policymakers are likely to be worried about signs that price pressures are picking up when sales growth remains relatively lacklustre and is expected to worsen next year when

an impending VAT hike starts to bite.

A separate survey from the Bank of England showed inflation expectations for the year ahead hit their highest level in two years in November — a rate of 3.9 percent, nearly double the central bank’s 2 percent target.

The retail sales figures also showed rising inflationary pressures, particularly for clothing and footwear. These were, on average, 2.5 percent higher on the year, the biggest annual increase since records began in 1988.

The ONS said retailers had claimed they were absorbing the big jump in global cotton prices but the figures suggested otherwise.

The Bank is caught between slowing growth on one hand — figures on Wednesday showed unemployment rising again — and above-target inflation on the other. Most analysts expect it to keep policy unchanged for some time to come.

“We still believe it will be 2012 before the BoE hikes rates,” said James Knightley, economist at ING.

Bank policy dove Adam Posen repeated his call for more stimulus to the economy on Thursday and said that it was important not to overreact to inflation, but so far there is little sign any other Monetary Policy Committee members share his view.


Household goods sales fell by 1.1 percent, their biggest decline since April, and a result of much weaker furniture and hardware/paint sales, perhaps in line with the weakening housing market. Sales of audio-visual equipment like televisions and hi-fis were holding up, however, maybe as consumers tried to beat the January VAT hike.

The ONS figures also showed consumers increasingly turning to the web to do their shopping. Internet sales accounted for more than 1 of every 10 pounds spent, the highest proportion on record and versus around 7.9 percent of total sales in November 2009.

Statisticians said shops had told them people were still coming in to browse but then going home and buying things online. They said there had been no evidence that last month’s particularly cold weather had any effect on sales or shopping patterns.

Editing by Patrick Graham

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