2020.10.2307:43:00UTC+00UK Retail Sales Growth Tops Expectations

UK retail sales grew for a fifth consecutive month in September and exceeded expectations by a wide margin supported by food and online sales as well as a recovery in non-food sales, preliminary data from the Office for National Statistics showed on Friday.

The volume of retail sales grew 1.5 percent month-on-month in September, which was much bigger than the 0.4 percent increase economists had forecast.

The growth for August was revised up to 0.9 percent from 0.8 percent.

Sales excluding fuel rose 1.6 percent monthly, exceeding the forecast for 0.5 percent growth, after a 0.6 percent increase in August.

Retail sales were 5.5 percent higher compared to February's pre-pandemic level, ONS said.

Food stores sales grew for a second month, by 0.7 percent after a 0.4 percent increase in the previous month.

Non-food store sales grew 4 percent after a 3.2 percent increase in August, led by a 7.3 percent growth in household goods sales. Fuel sales rose just 0.1 percent.

The proportion of online sales was at 27.5 percent in September versus 20.1 percent in February. This was despite small monthly declines across most of the retail sector.

The share of online sales by food stores nearly doubled to 10.4 percent in September from 5.4 percent in February.

"Food stores and online retailers have fared particularly well in recent months and most other store types have now recovered to pre-pandemic levels too after being subject to temporary closures during restrictions in the spring," ONS statistician Jonathan Athow said.

Spending on home improvement and gardening items in particular have boosted sales, the ONS official said.

Athow also said that clothing store sales have been slower to recover and fuel sales remain subdued as people continue to work from home and have reduced the amount the travel.

On a year-on-year basis, retail sales increased 4.7 percent in September following a revised 2.7 percent growth in the previous month. Excluding fuel, retail sales rose 6.4 percent after a 4.3 percent growth in August.

Economists had forecast 3.7 percent and 5 percent gains, respectively.

Meanwhile, the resurgence of coronavirus infection suggest economic activity is likely to be hurt again in the coming months.

"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," ING economist James Smith said.

ING expects October monthly GDP to record a contraction.