Britain's retailers have begun the fourth quarter on a weak footing before the busy Christmas period, official data showed Thursday, but analysts expressed cautious optimism. Sales rose just 0.3 percent in October from the previous month, buoyed partly by second-hand goods stores, the Office for National Statistics said in a statement.
That narrowly beat expectations for a 0.2-percent gain and followed a drop of 0.7 percent in September. However, on an annual basis, retail sales fell 0.3 percent in October compared with one year ago - when retailers had experienced a unusually strong performance. That marked the first annual decline since March 2013.
"October's official retail sales figures supported the timelier surveys in suggesting that spending on the high street has lost more momentum," said economist Ruth Gregory at research consultancy Capital Economics. "With real incomes under pressure from subdued nominal wage growth and rising inflation, it is not surprising that spending growth has lost further momentum."
Official data had revealed Wednesday that wages growth remains far below the overall UK inflation rate, hurting workers' purchasing power at a time of stretched household budgets. The Consumer Prices Index 12-month inflation rate held at a five-year high of 3.0 percent last month as rising food prices offset falling petrol costs, data showed earlier this week.
"Inflation data and wage growth figures confirmed the squeeze on household incomes continues," said Ben Brettell, economist at stockbroker Hargreaves Lansdown. "But so far the UK consumer has proved surprisingly resilient, and retail sales have held up better than many expected." He added: "As ever with retail, the Christmas period, which kicks off with Black Friday on 24 November, will be crucial."
On so-called Black Friday, retailers slash the cost of certain items at the start of the festive period in a bid to add sparkle to their Christmas performance. There is still potential for a rebound in retail sales if colder weather arrives and stimulates demand for winter clothing, analysts say. In addition, some shoppers may have reined in spending in October so they can then splurge cash on gifts and treats in the coming months.
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