2017.09.2007:39:00UTC+00UK Retail Sales Rise Most In 4 Months

UK retail sales grew the most in four months in August as consumers spend more despite higher inflation, vindicating a possible stimulus withdrawal in the months ahead.

According to data published by the Office for National Statistics, the retail sales volume including auto fuel advanced 1 percent in August from July, the biggest growth in four months, exceeding the expected rate of 0.2 percent and July's increase of 0.6 percent.

Sales increased for the third straight month and a similar sequence of growth was last reported in the first half of 2015.

Excluding auto fuel, retail sales also climbed 1 percent in August after rising 0.7 percent a month ago. Sales were expected to rise slightly by 0.1 percent.

Food store sales gained 0.2 percent and non-food store sales advanced 0.9 percent. Clothing and footwear sales dropped 0.2 percent, while auto fuel sales climbed 0.6 percent.

Year-on-year retail sales volume growth improved to 2.4 percent from 1.4 percent. Economists had forecast a 1.2 percent increase. Sales advanced for the 52nd consecutive month.

Excluding auto fuel, retail sales gained 2.8 percent versus July's 1.7 percent increase and far exceeded the expected 1.4 percent.

Both non-food stores and non-store retailing registered their highest annual price growth since March 1992.

Retail sales figures indicate that consumers are showing impressive resilience in the face of the real pay squeeze and suggest that talk of the economy losing further momentum has been overdone, Ruth Gregory, a UK economist at Capital Economics, said.

A moderate pick-up in household spending in the third quarter should help the economy to re-accelerate a little ahead and adds weight to the assessment that the Bank of England will hike interest rates in November, the economist added.

However, Agents' summary of business conditions of the Bank of England, released Wednesday, showed that retail sales growth had remained subdued in values terms, especially in non-food sectors.

Growth was challenged by modest rises in earnings and weakening consumer confidence. Demand for clothing and footwear had been depressed by poor weather, the summary said.

The Organisation for Economic Co-operation and Development said Wednesday the slowdown in the UK growth is expected to continue through 2018, while uncertainty remains over the outcome of negotiations around the Brexit decision.

The Paris-based OECD maintained its UK growth projection at 1.6 percent this year and 1 percent in 2018.