U.K. Retail Sales Rise in September

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The FINANCIAL — The Rugby World Cup drove retailers in the U.K. to have a bumper September, official figures showed on October 22, lifting the economy’s growth prospects during the third quarter amid earlier signs of weaker activity elsewhere, according to Nasdaq.

U.K. retail sales volumes rose 1.9% on the month, the Office for National Statistics said, the largest increase in almost two years. Sales grew 6.5% year-over-year. This was much stronger than economists polled by The Wall Street Journal last week were expecting.

According to government statisticians, the Rugby World Cup that is taking place in the U.K. has so far paid off handsomely for retailers, despite England–where 84% of the population live–being knocked out early. Stores ramped up sales of food and alcoholic beverages–chiefly beer–through aggressive discounting, official data revealed. Average store prices dropped by an annual 3.6% in September, matching a record dip seen in February which was driven by falling oil prices.

A recovery in retail sales after two months of weak growth is good news for the British economy, which has shown signs of slowing during the third quarter. The performance of retailers is also a key gauge of the strength of the broader services sector, which is the main engine of the U.K. economy, making up almost 80% of national output.

Many economists believe British gross domestic product expanded at a slower 0.5% in the third quarter compared with 0.7% the second, but the Bank of England is more optimistic and forecasts 0.6% growth. September’s uplifting figures mean retail sales will contribute 0.1 percentage points to growth during the period, the ONS said, raising hopes that growth rates will be closer to the BOE’s prediction.

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Indeed, indications are that households remain optimistic and eager to keep spending, which means Britain’s outlook during the second half of the year remains healthy. Official figures released last week showed wages continued to rise even as unemployment went down, a sign that employees are being more productive for each hour of work. Productivity gains are paramount to ensuring economic growth remains robust in the medium term, economists said.



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