Retail sales grew solidly in October, rising at their fastest year-on-year rate for 18 months, business leaders reported yesterday, prompting fears that the Bank of England will raise interest rates this week.
Figures from the Confederation of British Industry show sales grew in September but by less than had been expected. October's performance was much stronger and outstripped expectations.
Some 21% of retailers said sales were down compared with October last year but 56% said they were up. The balance of +35% represents the fastest rate of growth since April 2002 and compares with the 28% that had been expected.
The underlying trend, which irons out month-to-month volatility, also shows sales growth at its strongest for 11 months, though it is still just below the average of the last 10 years.
The recovery was broad based with year-on-year sales growth in all but one of the retailing sectors. Grocers saw the strongest growth followed by sellers of hardware, china and DIY goods. Only shops selling durable household goods, such as washing machines and televisions, saw sales fall compared with a year ago.
Looking ahead to November retailers expect sales growth to pick up further. The balance of firms expecting sales growth, at +37%, is the highest since May 2002.
CBI chief economic adviser Ian McCafferty says: “This is a solid pick-up. The change to colder, more typical autumn weather, and good sales of seasonal ranges have boosted some traders.
“With rising house prices, low unemployment and consumers happy to borrow at record levels retailers believe this stronger growth will persist. After the knocks from tax rises and the Iraq war earlier in the year, this revival in consumer confidence is good news for the wider economy.”
On interest rates, McCafferty adds: “Clearly the pick-up in the global economy has strengthened the case for a reversal of the precautionary cut made by the bank in July, which was intended to give the UK some insurance in case the global economy took a further turn for the worse.
“But the recent recovery in the wider UK economy is in its early stages and is still fragile. The bank needs to ensure that it does not damage business confidence with a series of quick rate rises. The MPC must make clear that in the coming months it will not choke off a recovery that has still not fully taken hold.”