Surprise as retail sales drop back

RETAIL sales dropped back last month as consumers reined in spending, particularly on food, after a July spree.

Sales volumes fell 0.9% in August on July, wrong-footing economists who had expected a rise of 0.4%

The annual rate of growth slowed to 2.1% from July’s 30-month high of 3%.

The July figure was boosted by a heatwave, which lifted sales of BBQ food and outdoor items. The birth of Prince George and a string of sporting successes including Andy Murray’s Wimbledon triumph provided an additional reason to splash out.

Food sales fell 2.7% on the month in August, fully reversing July’s gain.
Rising house prices, record low mortgage interest rates and signs of economic recovery have given consumer spending a boost in recent months.

However, with inflation continuing to outstrip wage growth, economists question whether this rise will be sustainable.

Some retailers have sounded a cautious note on the prospects for recovery. Morrisons, Britain’s fourth-biggest grocer, said last week that higher levels of spending in the London area were not indicative of the rest of the country.
Next, the country’s second-largest retailer, sounded similarly downbeat, saying a full-blown recovery would require growth in real earnings, not just borrowing.

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