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Retail sales beat expectations - HL comment

Ben Brettell, Senior Economist, Hargreaves Lansdown:

Today’s retail sales data provided the final piece in a pretty mediocre jigsaw for the UK economy this week.

Inflation data and wage growth figures confirmed the squeeze on household incomes continues. But so far the UK consumer has proved surprisingly resilient, and retail sales have held up better than many expected.

We’ve been waiting for the pay squeeze to filter through to the high street, and at first glance today’s numbers aren’t good news on that front.

A decline of 0.3% is the first annual drop since March 2013. But the numbers aren’t as bad as they look. A 0.3% drop is better than the 0.6% fall which was forecast. The monthly figures are volatile, and October 2016 was an exceptionally strong month, so the comparatives are tough. The rolling three-month figures still show an underlying trend of growth.

As ever with retail, the Christmas period, which kicks off with Black Friday on 24 November, will be crucial.

The Bank of England says household consumption growth will slow from 1.5% to 1% in real terms next year, but that business investment and exports should pick up the slack in terms of aggregate demand. The overall picture remains lacklustre, but not disastrous.