UK retail sales rose more than expected in October, underpinned by spending on toys and clothes in the run-up to Christmas.
According to figures from the Office for National Statistics, retail sales were up 0.8% on the month, coming in ahead of expectations for a 0.5% increase and leaving sales 5.8% above pre-pandemic February 2020 levels. September’s sales figure was revised up from a 0.2% fall to flat.
Non-food store sales were the only major component to see month-on-month growth, of 4.2%. Within non-food, clothing sales jumped by 6.2%, with some retailers suggesting that early Christmas trading had boosted sales. The ONS said this was supported by analysis within the Coronavirus and social impacts release, which indicated that the most common items bought or pre-ordered earlier than usual for Christmas this year included toys and clothes, shoes or accessories.
Clothing stores sales are now just 0.5% below their pre-pandemic levels.
Meanwhile, “other” store sales, which include toy retailers, jumped 7.2%. Food store sales fell 0.3%, while petrol sales declined 6.4% in the wake of September’s panic-buying.
The retail sales figures came as the latest survey from GfK showed consumer confidence edged up in November despite the rising cost of living, although households’ view of their own finances remained weak.
The GfK consumer confidence index rose by three points to -14, reversing most of the four-point drop from the month before. Households were less gloomy about the general economic situation over the past 12 months and the coming year and were marginally more positive about their own finances for the coming year.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “Retail sales likely will fall back in November and struggle to rise further over subsequent months. Households’ real disposable income likely will drop by about 1.0% quarter-on-quarter in Q4 due to soaring CPI inflation, a reduction in benefit payments and the end of grants to self-employed people. After brief respite in Q1, households’ real disposable income probably will drop by a further 1% in Q2, in response to the 1.25pp increase in the rate of employees’ national insurance contributions in April, as well as a huge increase in Ofgem’s energy price cap of about 27%.
“Admittedly, households still can spend more over the coming quarters, despite their incomes falling, if they reduce their saving rate from its current above-average level. But weak consumer confidence suggests households will continue to be cautious. Note that GfK’s composite index of consumers’ confidence remained slightly below its -13 average level in the 2010s, despite rising to -14 in November, from -17 in October.”
