UK retail sales for August better than feared

Retail sales in the UK were not as bad as feared in August, according to official figures released on Wednesday, further lowering the likelihood that the Bank of England will adjust interest rates later in the day.

UK retail sales dropped 0.2% on a monthly basis, better than the 0.4% decline forecast by the economists but a sizeable slowdown after a strong July, where sales have been revised up from 1.4% to 1.9%.

The annual rate of growth slowed slightly to 6.2% from a revised 6.3% but was much higher than the estimated 5.4%.

Excluding petrol, retail sales volumes grew 5.9% on an annual basis, up from 5.8% in July and much better than the slowdown to 4.8% forecast, while month-on-month sales excluding fuel declined by 0.3% versus a revised 2.1% rise in July, and better than the 0.7% decline that was expected.

“Despite a small fall after July's sharp increase, the underlying pattern in the retail sector remains one of solid growth," ONS head of retail sales Mel Richard said.

"There was some variation between different sectors but overall the figures do not suggest any major fall in post-referendum consumer confidence.”

Capital Economics' UK economist Paul Hollingsworth said despite August’s dip, spending on the high street "is still going gangbusters" although he expects some moderation over the next few quarters.

"Admittedly, some slowdown in the pace of spending growth looks likely. While the survey evidence has been relatively upbeat, a number of indicators still point to a slowdown on the basis of their past relationship with the official figures," he added, pointing to likely headwinds such as slower growth in employment and real earnings and lower confidence that could be balanced by low interest rates and a likely easing in the fiscal squeeze at November's Autumn Statement from the new Chancellor.

Ben Brettell at Hargreaves Lansdown the data was "yet another piece of evidence which shows the economy has fared better than expected since June’s referendum", helped by last month's figure being revised upwards to the strongest July in 14 years.

"The vote to leave the EU appears to have had little to no effect on consumers’ willingness to spend, and the underlying trend in UK retail sales remains one of robust growth," he said, noting that surveys forecasting a sharp weakening of activity have so far failed to appear in the hard data.