UK retail sales fell in October as shoppers bought less food and clothing, puncturing a consumer spending revival that policymakers hoped would kick-start the economy heading into 2013. Sales volumes fell 0.8 percent on the month for an annual rise of just 0.6 percent, the Office for National Statistics said on Thursday. Both numbers were the weakest since April and much worse than forecast, and sent sterling lower against the dollar and the euro.
Food shops reported the biggest monthly decline in sales since November 2011. "I think a contraction in GDP is on the cards for the fourth quarter," said Rob Wood, economist at Berenberg Bank. Britons have suffered the biggest drop in disposable incomes for more than 30 years as soaring food and fuel prices and higher taxes have eaten away at pay packets that have risen little or not at all. The government and central bank had vested high hopes for the economy on consumer spending, and retail sales had risen 0.5 percent month on month in September.
But a rise in inflation to a five-month high of 2.7 percent in October put that in doubt because wages are rising at a much slower pace. On Thursday a report by grocer Asda, based on official data, showed that the amount of money households had left after paying taxes and buying basic goods rose last month, but much more slowly than in September.
Electrical retailer Comet fell into administration earlier this month, becoming the latest high-street victim of Britons' reluctance to spend. The ONS said retail sales excluding fuel fell 0.7 percent on the month and were 1.1 percent higher than in October 2011.