UK retail sales rise in August on strong housing market

The volume of UK retail sales grew by 0.4% month-on-month in August, and by 3.9% when compared to the year ago period, according to the Office for National Statistics (ONS).

The consensus estimated a 4% growth year-on-year but the monthly growth met expectations.

In July, growth was flat, while in June it only increased by 0.1%.

People spent more money in the retail industry last month, with 0.2% growth from the month before and 2.7% compared with same time last year.

The ONS said the retail sales growth was driven by a 12.7% increase in household goods sales such as furniture and electrical appliances.

In non-seasonally adjusted terms the implied price deflator for retail goods decreased by 1.2%.

However, average store prices fell by 1.2% in August compared to last year, the largest fall in five years.

Chris Williamson from Markit said despite the upturn in sales, the trend “has weakened and suggests that the Bank of England has correctly anticipated a slowing of the economy in the second half of this year".

Meanwhile, IHS analysts said: “Elevated confidence, high and rising employment and muted inflation is supportive to consumer spending, while a strong housing market also tends to support retail sales.

“However, it is questionable how strong consumer spending can be on a sustained basis until current very low earnings growth picks up appreciably.

“The prospect of interest rates starting to edge up before long may also be a concern to a significant number of consumers given that debt levels are still high.”