UK retail sales better than expected in August

Retail sales rose 0.2 per cent in the month, whereas City of London economists had expected a 0.2 per cent contraction following the strong performance in the July heatwave

Summer department store sales volumes were up 1.3 per cent on last year (Getty)

UK shoppers spent more than expected in August, confirming that the British consumer remains in decent shape.

The Office for National Statistics reported that retail sales volumes rose 0.2 per cent in the month, whereas City of London economists had expected a 0.2 per cent contraction in the wake of the strong performance in the July heatwave and the World Cup.

Over the three months to August sales were up 2 per cent, with growth in July revised up from 0.7 per cent to 0.9 per cent.

Sales volumes on the summer of 2017 were up 3.2 per cent, with department store sales up 1.3 per cent and food store sales 3.2 per cent higher.

Household goods stores were up 5.8 per cent and non-store retailing up 12.8 per cent.

Retail sales account for about 20 per cent of the economy and are a bellwether of overall consumer behaviour.

The overall economy grew by 0.4 per cent in the second quarter of 2018 and many analysts now expect that to strengthen to 0.5 per cent in the third quarter, driven by consumer spending.

“Some strengthening in consumer spending growth in Q3 looks likely,” said Andrew Wishart of Capital Economics.

“And while inflation unexpectedly ticked up in August, we still think that it will ease to 2 per cent by this time next year, paving the way for a sustained recovery in consumer spending growth.

The ONS reported that in August sales in food stores fell by 0.2 per cent, but sales at non-food stores rose by 0.5 per cent.

Despite the relatively robust aggregate retail figures some big high street names have been struggling, including the John Lewis Partnership, which last week announced squeezed profit margins due to heavy discounting in the first half of 2018.

The ONS said that sales were boosted in August by promotions on furniture and electrical appliances.

The agency reported on Wednesday that inflation unexpectedly spiked to a six-month high of 2.7 per cent in August, raising the possibility that the Bank of England could raise interest rates more rapidly than currently anticipated by markets.