UK retail sales rise modestly

Retail sales in Britain rose modestly in October, official figures showed yesterday, indicating the sector may be recovering after a sharp slowdown earlier in the year.

The Office for National Statistics said sales rose 0.2 per cent last month after a downwardly revised 0.6 per cent gain the month before. That was exactly as predicted by analysts and doubled the annual rate of growth to 1.5 per cent - its highest since June.

Statisticians said sales are picking up after a period of no growth. Consumers have been hit hard this year by hefty household bills, rising petrol prices and costly debt repayments.

But retailers appear to be achieving volume growth at the expense of their profit margins. Prices were on average 1.1 per cent lower than a year earlier, the biggest decline since February.

As such, the figures are unlikely to settle the debate about whether the next move in interest rates will be up or down.

"Spending appears to be recovering modestly helped by ongoing deflation. But for retailers and policymakers alike it is the next two months that are critical," said Geoffrey Dicks, economist at RBS Financial Markets.

The Bank of England this week predicted consumer spending would pick up, underpinned by a gentle recovery in the housing market.

Monetary Policy Committee members appear to be in wait-and-see mode ahead of the crucial Christmas shopping season and New Year wage round and looks set to leave interest rates at 4.5 per cent for the next few months. Textiles, clothing and footwear was the only retail sector where volumes fell on the month in October, by 0.3 per cent.

"That was understandable in the context of mild weather which will have impeded sales of autumn/winter ranges," said Alan Clarke, economist at BNP Paribas.