British retail sales fell unexpectedly in August for the first time in seven months, in a sign the recovery may be stalling even as some of the country's biggest stores announced jumps in profits. The Office for National Statistics said on Thursday that sales volumes fell 0.5 percent last month, defying expectations of a 0.3 percent rise and raising concern that waning consumer confidence is beginning to dent retail demand even before next year's planned VAT and income tax hikes.
Still, retail bellwether John Lewis posted a 28 percent jump in its results for the six months to July 31. Kingfisher, Europe's largest DIY retailer, which owns 330 stores in the UK, saw its profits jump 21.9 percent. But both economists and retailers warned that the recovery from the worst recession since World War 2 may already have peaked. Data on Wednesday showed the first rise in the number of people out of work and claiming benefits since January.
"August's fall in retail sales could be the first sign that the surprising resilience of consumer spending could be coming to an end," said Vicky Redwood at Capital Economics. "The pressures on consumers are clearly mounting." Bank of England policymakers remain on alert over whether they may yet to have put more stimulus into the economy despite inflation that is well above its 2 percent target. A BoE survey on Thursday showed inflation expectations hitting a two-year high in August, suggesting above-target price rises are starting to become embedded in consumer psychology.
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