Retail sales rise by 0.2 per cent in November after pre-budget decline

UK RETAIL sales increased by 0.2 per cent in November, according to official data, reflecting a modest recovery after October’s decline as concerns about the government’s budget eased. However, the growth was weaker than the 0.5 per cent increase forecast by economists polled by Reuters.

The Office for National Statistics (ONS) reported that the November rise marked the first increase since August. Over the three months to November, sales volumes grew by just 0.3 per cent, the weakest performance since the three months to June. Sales volumes had dropped by 0.7 per cent in October amid caution ahead of Chancellor Rachel Reeves’ tax and spending plan.

Earlier figures showed the UK economy contracted in September and October, marking the first consecutive monthly declines since the Covid-19 pandemic. Analysts attributed much of the slowdown to concerns about Reeves’ 30 October budget, which increased taxes for employers rather than consumers.

The budget introduced £25 billion in higher social security contributions for firms, leading to reports of a hit to companies’ hiring plans. Surveys conducted since the announcement have highlighted these impacts.

On Thursday, the Bank of England said the economy would likely show no growth in the final quarter of 2024. Despite signs of weak activity, it decided not to cut interest rates due to persistent inflationary pressures.

"Overall, against a backdrop of recent weak activity data, today’s release could have been worse," said Alex Kerr, an economist at Capital Economics. He added, "As real incomes continue to grow and consumer confidence improves next year, we think the retail sector will contribute to an acceleration in consumer spending growth."

The ONS noted that food store sales rose in November for the first time in three months. Major supermarket chains Tesco and Sainsbury’s have forecast strong Christmas sales, though clothing store volumes fell by 2.6 per cent compared to October.

Retailers such as JD Sports, Frasers, and Poundland have issued cautious outlooks, while Shoe Zone warned of "very challenging trading conditions" in early December.

The ONS said its November figures accounted for most of the Black Friday discounting season, though some sales began earlier. School half-term holidays, which unusually fell in November this year, were not adjusted in the data.

(With inputs from Reuters)