The FINANCIAL — U.K. retail sales fell in October, official figures showed on November 19, slightly denting hopes that a buoyant Christmas season will drive the economy to grow at a faster pace in the final quarter of the year, according to Nasdaq.
British retailers sold 0.6% less in volume terms during the month, the Office for National Statistics said. This was a surprise dip, as economists polled by The Wall Street Journal last week were expecting a small rise. While sales were still 3.8% higher compared with October 2014, the annual pace of growth was almost half September’s 6.2% rate.
Sales were dragged down significantly by a fall in the purchases of food and drinks. Alcohol sales had surged in September due to aggressive promotions–mostly for beer, government statisticians said–during the Rugby World Cup, which this year took place in the U.K.
The fresh data leaves analysts to ponder whether the British economy is likely to slow further in the final quarter of the year, after the ONS confirmed last month that activity slackened between July and September.
However, business surveys showed retailers were still expecting consumers to ramp up spending in November. A strong uptick in online sales also suggested the October fall was just a blip, economists said, as it is likely to mean consumers were taking a pause while planning for the Christmas season.
“The shopping period over the coming weeks is of vital importance to retailers, and it will be interesting to see how aggressive they are in their discounting in the run-up to Christmas,” said Howard Archer, economist at IHS Global Insight.
Indeed, analysts are eager to determine whether the allure of Black Friday–the Friday following Thanksgiving Day in the U.S.–continues in the U.K. While British retailers have long followed the American tradition of slashing prices during this day, last year saw an unprecedented number of shops in the U.K. engage in Black Friday promotional campaigns, attracting a record number of consumers. Furthermore, aggressive discounts last November didn’t come at the expense of Christmas purchases, which lifted the economic recovery as 2014 came to a close.
Repeating last year’s success will be key if the British economy is to finish the year growing at a strong pace, since policymakers at the Bank of England have warned weakness in emerging markets could pose a danger to Britain if it hampers its main trading partners.
While the latest consumer confidence indicators point to the optimism of households being muffled by international concerns, economists believe recent healthy gains in pay and employment will allow the services sector–Britain’s main economic engine–to have a bumper final quarter of 2015.
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