High street ‘remains positive’ despite surprise fall in sales

Retail sales suffered an unexpected fall last month as shoppers tightened their belts after July’s spending spree.

Shoppers appear to be holding off spending after July spree. Picture: Jon Savage

Economists cautioned against reading too much into one month’s data, though, and said underlying trends for the high street remained positive.

According to the Office for National Statistics, retail sales volumes dropped by 0.9 per cent between July and August, confounding expectations of a 0.4 per cent increase, as the amount ringing through the tills fell by £1 billion to £26.9bn.

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The main decline came in the food sector, where sales fell 2.7 per cent, reversing the 2.7 per cent gain seen in July, when the heatwave spurred demand for food and summer clothing.

Barclays economist Blerina Uruci said: “Given the volatile nature of the monthly retail sales data, we would not see this weak performance as a reason to start questioning the recent improvement in general activity.

“Given the pick-up in consumer confidence, we expect prospects for the retail sector to improve gradually.”

Overall sales volumes were still up 2.1 per cent year-on-year in August, although that marked a slowdown from July’s increase of 3 per cent, which had been the fastest expansion in more than two years.

Chris Williamson, chief economist at Markit, said: “Consumers pulled back on their retail spending after a spending spree in July, but retail sales are still trending higher at the fastest rate since mid-2007, meaning the economy looks set to have grown strongly in the third quarter.”

On Wednesday, the Bank of England said it had upgraded its third-quarter growth forecast to 0.7 per cent, up from its previous prediction of 0.5 per cent, but Williamson said the figure could turn out to exceed 1 per cent.