Retail sales sluggish in August as UK shows signs of slow economic growth

UK shoppers spent 3.7% more on retail products in August 2015 than they did in the same month in 2014, figures by the Office for National Statistics reveal. Compared to July, retail sales in August were up 0.4%, a sluggish growth lower than market expectations. Online sales were down 2.7% from July, even though year-on-year growth was 7.4% in August.

Howard Archer, chief UK economist at IHS Global Insight, said that the modest growth is further proof that the UK economy has "hit a soft patch in the third quarter". He said: "The sales data reinforce our belief that third-quarter GDP growth is unlikely to come in any better than 0.5% quarter-on-quarter, which would be down from expansion of 0.7% quarter-on-quarter in the second quarter."

"Nevertheless, the prospects still look largely favourable for consumer spending with a fall in inflation to 0.0% in August and a pick-up in annual underlying earnings growth to 3.2% in July (the highest since early 2009) highlighting healthy purchasing power."

Retail prices excluding petrol fell by 3.3% in August, according to the ONS. It is the 14th consecutive month of falling prices.

Considering the news on 16 September that both total pay (which includes bonuses) and regular pay (without bonus) edged up by 2.9% compared to the year before, against an inflation rate of 0.1% in July, overall expenditure was expected to go up a significant amount more. The absolute amount of jobs were at a record high in the quarter, which was expected to boost customer spending.

Archer added that "signs of a pick-up in housing market activity should be supportive to consumer spending through boosting demand for household goods and furnishings". He added: "While the fundamentals may become a little less strong for consumers in 2016, they should still be pretty healthy."