Retail sales in the UK unexpectedly rose in September, suggesting consumer spending remains resilient despite looming economic uncertainties.
- Data from the Office for National Statistics (ONS) reports a 0.3% increase in retail sales volumes, countering predictions of a 0.4% decline.
- The annual growth of 3.9% in retail sales marks the strongest rise since February 2022.
- Tech and other non-food stores see notable increases, whereas supermarket sales decline.
- Economists suggest consumer spending may withstand potential tax hikes in the upcoming Budget.
In an unexpected development, UK retail sales rose by 0.3% in September, as reported by the Office for National Statistics (ONS), challenging economists’ forecasts of a 0.4% drop. This growth defies widespread fears concerning the economic slowdown and impending taxation changes. Furthermore, the annual increase of 3.9% in sales marks the most significant annual rise since February 2022, highlighting an upswing in consumer confidence.
Tech and other non-food retail sectors reported strong sales growth. ‘Other non-food stores’ experienced a 5.5% rise, particularly bolstered by purchases in computer and telecommunications, possibly fueled by back-to-school spending. However, supermarket sales fell by 2.4% as retailers blamed poor weather and ongoing reductions in luxury food spending by households.
Despite this downturn in supermarket sales, the latest data suggests that consumers are still inclined to spend, even with potential tax increases looming in the Budget, set to be delivered by Chancellor Rachel Reeves on October 30. Economist Alex Kerr from Capital Economics noted, ‘Whilst households may be apprehensive about potential tax increases, these fears are not yet impacting their spending decisions.’ Kerr implies that continued improvement in real incomes might sustain retail expenditures, notwithstanding anticipated fiscal changes.
The ONS figures reveal a quarterly sales growth of 1.9%, equalling the rise seen in the quarter ending in March, which is the most substantial since July 2021. Additionally, this period also saw a 2.6% increase compared to the previous year, marking the highest growth since March 2022. Neil Birrell, Chief Investment Officer at Premier Miton Investors, remarked that the figures suggest the economy is more robust than previously perceived, indicating a potential resilience against economic headwinds.
The resilience in retail sales illustrates that UK consumers remain undeterred, even as economic challenges persist.
