UK High Street sales drop unexpectedly in August, BRC says

Total retail sales slipped by 0.3% year-on-year in August, according to the British Retail Consortium.

That compared to a 0.1% increase in August 2015 and was the weakest performance since September 2014, excluding Easter distortions.

On a like-for-like basis, total sales dropped 0.9% (consensus: 1.1%), while in August 2015 LFL sales declined by 1.0% year-on-year.

Measured on a three-month basis, total retail sales rose by 0.6%, half the average 12-month rate of 1.2%, BRC said in a statement.

Within that, and also on a three-month basis, food sales were up by 0.9% - their best showing since December 2013.

Non-food sales on the other hand increased 0.4%, significantly slower than the 12-month average rate of 1.9%.

However, BRC attributed the decline in non-food sales to the warmer weather, leading it to the conclusion that it was therefore likely to be shortlived.

Experts left divided

"Growth in retail sales likely will pick up again in the near-term, but we expect a fundamental slowdown in volumes growth next year, when retailers will pass on the rise in import prices to consumers in earnest and firms will still be holding back from hiring due to uncertainty about the U.K.’s future trading relationships.

"[...] The official data have been much stronger than the BRC data for the last four months, but this likely will not preclude a sharp month-to-month fall in the official measure in August," commented Pantheon Macroeconomics´s chief UK economist Samuel Tombs.

Ruth Gregory, UK economist at Capital Economics took a slightly different slant on the data, telling clients that: "August’s BRC Retail Sales Monitor points to a large dip in official retail sales growth. But the survey hasn’t been an especially good guide of retail sales recently.

"All in all, then, while it would be fairly surprising if retail sales growth didn’t slow at all as the labour market softens and inflation increases, other supportive factors – including low interest rates – should prevent consumer spending from slowing sharply ahead."

BRC boss Helen Dickinson said "care should be taken in reading too much" into August´s lacklustre performance.

"The fact is that so far little has directly changed for the UK’s consumers as a result of the referendum, so it’s the pre-existing market dynamics that are still driving sales. The slowdown in real wage growth in the first half of 2016 and strong competition will continue to weigh on trend growth in total sales," she said.

As of 0945 BST cable was 0.26% up on the day at 1.3337.