British Retail Sales Rise in November

By William Schomberg

LONDON (Reuters) – British retail sales rose by a weaker-than-expected 0.2% in November, according to official data. This suggests consumers have overcome concerns about the new government’s first budget, but it also adds to signs of only slow economic momentum.

A Reuters poll had forecast a monthly increase of 0.5% in sales volumes following a 0.7% drop in October leading up to Finance Minister Rachel Reeves’ tax and spending plan.

The rise in sales was the first since August. However, over the three months to November, volumes increased by only 0.3%, marking the weakest performance since June, noted the Office for National Statistics (ONS).

Previously released data shows that the UK economy contracted in September and October, marking its first back-to-back shrinkage since the COVID-19 pandemic. Concerns regarding Reeves’ budget, which announced tax increases on employers rather than consumers, have largely been blamed for the slowdown. Surveys indicate a negative impact on companies’ hiring plans since she introduced £25 billion ($31.3 billion) of higher social security contributions for firms.

The Bank of England indicated zero growth for the final three months of 2024, though it did not cut interest rates due to ongoing inflation pressures. Alex Kerr, an economist at Capital Economics, noted, “Overall, against a backdrop of recent weak activity data, today’s release could have been worse.” He anticipates that as real incomes grow and consumer confidence improves next year, the retail sector will aid in accelerating consumer spending growth.

Following the data, the British pound remained stable against the U.S. dollar. The ONS reported that for the first time in three months, food store sales increased. Britain’s major supermarket chains, Tesco and Sainsbury, anticipate strong Christmas sales.

However, clothing stores struggled again, with volumes decreasing by 2.6% from October. Companies like JD Sports, Frasers, and discount retailer Poundland have expressed caution about the outlook. Footwear retailer Shoe Zone issued a profit warning, indicating “very challenging trading conditions” in early December.

The ONS noted that its November figures were adjusted due to Black Friday discounting, which largely occurred outside the reporting period, although some retailers began sales earlier. Unusually, school half-term holidays in England and Wales took place in November this year instead of October; however, this impact wasn’t accounted for in the data.

($1 = 0.7999 pounds)