United Kingdom retail sales plunge more than expected in September as inflation bites

Retail sales volumes fell by 0.8% in September, according to data released this morning by the ONS.

United Kingdom retail sales declined the most in six months in September as high inflation squeezed household spending amid subdued wage growth.

Rachel Lund, head of retail insight and analytics at the British Retail Consortium, said: "September's sales showed little evidence of consumers seriously shifting their shopping behaviour in response to the squeeze on spending power; with sales up in volume and value terms on a year ago".

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 now".

The ONS said retail prices continued to rise across all store types and were up 3.3% from a year earlier, the highest year-on-year increase since March 2012.

In the third quarter, retail sales grew 1.5 percent, the lowest pace since the second quarter of 2013.

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Average weekly earnings rose by 2.2% year-on-year, in line with the gain recorded in the previous month and slightly above the 2.1% figure analysts expected.

To this end, Thiru has asked those responsible for Bank of England to "resist temptation to increase interest rates, at present at 0.25%, especially during this period of great political uncertainty".

An escalation in price index that, as confirmed by Governor of Bank of England, Mark Carney, could "lead to an increase in interest rates in near future" if economy followed path it was taking, as one of tasks of Organism is to keep CPI at 2%.

Inflation looks likely to hover at 3% or just above for the rest of 2017, he noted, with earnings growth showing little sign of picking up despite the unemployment rate coming down to 4.3%.

"However, it is true that things remain challenging for the retail industry".

"A hike would help control inflation, but would further ease demand in the retail sector, whereas keeping rates on hold would favour demand, but could see inflation rising above the BoE's 3.0% maximum estimate of inflation".

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