UK Retail Sales Growth Stumbles in November Despite Budget Concerns
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British retail sales grew at a weaker-than-expected 0.2% in November, according to official data released on Friday by the Office for National Statistics, reports Reuters. This follows a 0.7% drop in October, leading up to Chancellor Rachel Reeves' first budget.
Economists had anticipated a 0.5% monthly increase in sales volumes, but the actual result highlights lingering economic headwinds and cautious consumer behavior. While the monthly increase marks the first since August, the three-month average growth rate to November was a meager 0.3%, the weakest performance since June.
"Overall, against a backdrop of recent weak activity data, today’s release could have been worse," Alex Kerr, an economist with consultancy Capital Economics, told Reuters.
The slowdown in retail sales is linked to uncertainty surrounding Reeves' budget, which raised taxes on employers. This has impacted hiring plans and contributed to a broader economic contraction in September and October, marking the first back-to-back shrinkage since the COVID-19 pandemic.
The Bank of England, in its latest assessment on Thursday, predicted zero economic growth in the final quarter of 2024, but refrained from cutting interest rates due to persistent inflationary pressures.
Despite the overall weakness, food store sales rose for the first time in three months, aligning with strong Christmas sales forecasts from major supermarket chains Tesco and Sainsbury's. However, clothing stores continued to struggle, with sales volumes declining by 2.6% from October. This echoes recent warnings from sportswear and fashion groups JD Sports, Frasers, and Poundland, as well as a recent profit warning from footwear retailer Shoe Zone.
The ONS noted that its November figures were adjusted to account for the Black Friday discounting period, which typically falls outside its reporting window. However, some retailers reported earlier Black Friday sales this year, while the unusual placement of school half-term holidays in November, instead of October, was not factored into the data.
The subdued retail sales figures further underscore the challenges facing the UK economy, characterized by persistent inflationary pressures and uncertain consumer sentiment. Despite some improvement in consumer confidence, the path to sustained economic growth remains tentative.