United Kingdom retail sales growth slows more than expected

The unemployment figure for the West Midlands fell by 17,000 in the three months to August

To be fair, sales fell by 1.3pc on the quarter during the first three months of the year and overall GDP was still up by 0.2pc. Excluding bonuses, average earnings were 2.1 percent higher.

Excluding auto fuel, retail sales climbed 1.6 percent, which was slower than the 2.6 percent increase seen in August.

ONS senior statistician Kate Davies said: "September's retail sales saw a monthly decline of 0.8%, reversing August's growth". The ONS said that 17% of sales took place online during the month.

"The slump in retail sales in September was driven by retailers implementing large price rises", Samuel Tombs of Pantheon Macroeconomics said.

Annual shop price inflation rose to 3.3% in September, up from 3.1% in August and 2.7% in July to the highest level since March 2012.

The value of pound fell immediately after the figures were released, with sterling down nearly half a cent to $1.3126, suggesting traders believe a rate rise next month is less likely.

Household squeeze as inflation hits highest level for five years
Non-food stores provided the greatest downward pressure following growth in August. The BOE and most economists expect economic growth of around 0.3 percent.

Analyst Laith Khalaf at Hargreaves Lansdown said the figures showed evidence of consumer belt tightening, with discretionary spending taking a particularly big hit, as shoppers prioritise more essential items as prices rise.

The pound fell by around 0.5% against the dollar on the back of the news.

Overall, this means that retail sales have grown by merely 1.2% on the year in the third quarter, the slowest rate of annual expansion in over four years, a worrying sign for the largely domestic-driven United Kingdom economy.

To this end, Thiru has asked those responsible for Bank of England to "resist temptation to increase interest rates, at present at 0.25%, especially during this period of great political uncertainty". Indeed, a nasty case of indigestion is probably warranted. Price increases are still absorbing the lion's share of growth in spending, with growth in food sales in September nearly entirely down to inflation. "On top of that the Bank could well find its credibility compromised if it fails to follow through on its recent hawkish commentary, and would once again be on the hook for providing "forward misguidance".

Ian Geddes, head of retail at Deloitte, said a November rate rise "could come at a challenging time for the retail sector".

"Today's figures highlight an awkward reality for the Bank of England, with reasons to both hike and hold".

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