Retail sales smash expectations in September

But economists warn that cancelled Christmas parties and socially distanced queues in the cold could hold back shopping

Shoppers continued to splash out last month, pushing up sales of food and DIY goods and powering the UK’s economic recovery. 

Retail sales grew for the fifth month running, up 1.5pc between August and September. This was well above economists’ expectations and marked a 4.7pc rise year on year, according to the Office for National Statistics (ONS). 

For the quarter to September, sales climbed 17.4pc compared to the three months before, a record quarterly rise.

More purchases were made online as people hunkered down, with internet orders accounting for 27.5pc of sales, up from 20.1pc in February.

However, fashion retailers continued to struggle, with clothing sales down 12.7pc since February, and the picture could worsen as restrictions curtail the Christmas party season.

Meanwhile, the hit to pubs and restaurants from new local restrictions is expected to benefit supermarkets.

Richard Lim, chief executive of Retail Economics, said:  "Consumers have proved extremely resilient as cancelled holidays, fewer trips out and less commuting have boosted discretionary spending power to the benefit of some parts of the retail sector.”

He added that social distancing rules could result in off-putting queues outside shops in the run-up to Christmas.

Thomas Pugh of Capital Economics said: "Total consumer spending will probably start to stutter over the next few months as the furlough scheme ends and unemployment rises, despite the increased generosity of the job support scheme.”

Consumer sentiment fell this month by the most since a slump at the start of the pandemic as lockdown restrictions tightened across much of the country, according to GfK. Footfall slid 3.1pc in the week to Oct 17, the fourth successive decline, data from Springboard showed. This is set to worsen as the figures were collected before non-essential retailers in Wales were shut until Nov 9.

James Smith of ING said: “While retail is unlikely to be as badly affected as other sectors by the Covid-19 resurgence, the deteriorating outlook is nevertheless another reason to think the post-lockdown recovery in UK economic activity has reached its limit.”

Low inflation should boost shoppers’ purchasing power and with households having paid off £15.7bn of debt from March to June, many will be in a better position to spend, Howard Archer, chief economic adviser to the EY Item Club, said. 

But he added: “Consumers may very well adopt a cautious approach to making major discretionary purchases given the uncertain economic environment.”

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