UK retail industry expands in September: ONS

UK retail sales advanced 0.6 percent in September and at an annualized rate of 2.2 percent, according to the Office for National Statistics. This follows an unexpected slowdown in August, when retail sales fell 0.8 percent.

On a quarterly basis, the retail industry increased 1.5 percent, the largest quarter-on-quarter rise since March 2008. Non-food stores and non-food retailing witnessed an increase in the quantity of purchases. Compared to a year ago, sales in non-food purchases increased 3.6 percent, while non-food retailing experienced a jump of 19.1 percent. Sales in food stores and petrol stations declined 0.6 percent and 2.4 percent over the same period, respectively.

The results are based on a monthly ONS survey of 5,000 UK retailers.

Growth in the retail industry is a sign consumer spending is on the increase, which points to a strengthening economy. The UK economy has enjoyed a strong rebound over the past several months, as job growth and manufacturing activity continue to improve. Growth in UK manufacturing reached a two-year high in August and advanced for the sixth consecutive month in September, according to monthly PMI figures.

Although consumer confidence is on the rise, wages have failed to keep pace with inflation. Earlier in the week the ONS reported an average wage hike of 0.8 percent for the three months up to August. When factoring in bonuses, wages rose 0.7 percent for the same period. Income growth remains “stubbornly low,” according to Ian Geddes of Deloitte. Bigger wage hikes are necessary to ensure economic recovery deepens, as the UK economy continues to push out of its worst recession in decades.

Geddes also said the retail industry will face ongoing pressure in the product development and branding departments. “Those who deliver highly desirable and creative products with distinctive and well-understood branding continue to reap the rewards,” said Geddes.

The British pound responded positively to the release, which helped propel the GBPUSD to the 1.6165 region, a gain of more than 1.3 percent.