Retail sales defied expectations amid Brexit fears in October as prices fell everywhere except petrol stations
UK retail sales grew at their highest rate since April 2002, amid fears that spending could be hampered by uncertainty around Brexit.
The volume of retail sales increased by 7.3 per cent in October, compared to the same month in 2015, while the amount spend rose 6.6 per cent on an annual basis, according to figures from the Office for National Statistics.
Meanwhile, the sales volume increased by 1.9 per cent compared to September, while spending rose 2.1 per cent month-on-month.
Today's stats follow the trend highlighted in figures from the British Retail Consortium. And the numbers go against expers' fears that the UK's vote to leave the EU would have freezing effect on consumer spending.
"The strong figures this month have been boosted by several factors," said ONS senior statistician Kate Davies.
"Cooler temperatures in October boosted clothing sales as shoppers took their cue to purchase winter clothing, while the supermarkets benefitted from Halloween.
"This has also coincided with the strongest growth in internet sales seen for five years."
The amount spent online increased by 26.8 per cent compared with October 2015 and by 1.3 per cent compared with September 2016.
This graph shows the rate of growth in non-store sales since 2013
"Many had anticipated that spending by consumers would have been hit hard by Brexit discussions, but very much like yesterday’s better than expected unemployment numbers it seems that Brexit is not yet a factor affecting individual spending," said James Hughes, chief market analyst at online broker GKFX.
"The average weekly spend in October was the highest it’s been in the whole of 2016, boosted by Halloween sales at supermarkets and cooler temperatures boosting clothing sales.
The lower pound is also helping to boost the retail sales as a weaker currency helps many to buy British and helps boost the economy.
He added: "We know that recently the economy has been improving and the continued positive readings and stimulus environment created by the BoE with its recent rate cut have helped to put the UK in a very strong position economically, and when negotiating over an EU exit deal. There are two things needed for a strong economy, spending and lending, today’s figures show the latter is in a very healthy position."
Clearly unsustainable
However, the numbers weren't greeted with such enthusiasm in all quarters – IHS Markit's Chris Williamson said the October "mini-boom" wouldn't last.
"Such strong growth is clearly unsustainable, and cracks are in fact already appearing," he said. "Households’ worries about their personal finances over the coming year hit a three-year high in November amid concerns about weak pay growth, job security, higher interest rates and – most importantly – spending power being eroded by rising prices."
Williamson added: "November saw the biggest drop in household savings for six months, with nest eggs broken into partly as a result of the desire to keep spending despite take home pay stagnating.
“It therefore seems inevitable that the combination of higher prices and weak wage growth will curb consumer spending in coming months. Goods producers’ costs jumped by the largest extent on record in October which, barring a major squeeze on retailers’ profits, will feed through to high street prices. Inflation is likely to easily breach two per cent next year. At the same time, wage growth remains a relatively muted 2.3 per cent.”