British retail sales in surprise drop

Friday, December 18, 2009
LONDON: Retail sales in recession-hit Britain fell unexpectedly in November for the first time in six months, dropping by 0.3 per cent compared with October, official data showed on Thursday.

Analysts’ consensus forecast had been for a month-on-month climb of 0.6 per cent in retail sales during the traditional busy pre-Christmas shopping season, according to Dow Jones Newswires.

Sales meanwhile jumped by 3.1 per cent last month compared with November 2008, the Office for National Statistics (ONS) said in a statement. However analysts had forecast a bigger rise of 3.7 per cent.

“The ONS figures today are surprising considering general expectations of rises in sales figures over the past month coupled with innovative strategies being adopted by retailers this Christmas season,” said Barclays analyst Richard Lowe.

“The mild and wet weather in November seemed to dampen demand for winter clothing, although retailers of household goods continued to benefit from a growing appetite for big ticket items, ahead of the increase in VAT,” he added.

Amid a deep British recession, the government slashed VAT (value added tax) to 15.0 per cent in December 2008 to help boost consumer spending but plans returning it to the previous level of 17.5 per cent in January.

Britain is the last major world power mired in recession after the eurozone, France, Germany, Japan and the United States all emerged from a deep downturn that was sparked by the global financial crisis.

Finance minister Alistair Darling last week admitted that Britain’s recession would be deeper than thought, with the economy predicted to shrink 4.75 per cent this year compared with a prior official estimate of 3.5 per cent.

“Overall, today’s (retail sales) figures are likely to take some of the shine off the expected recovery in the fourth quarter,” said Benjamin Williamson, an economist for the Centre for Economics and Business Research, an independent consultancy.