Retail revenues fall as clothing sales unravel

Retail sales fell by less than expected during September but annual growth declined to a two and a half year low after demand for new clothes and household goods slowed.

Sales volumes fell by 0.4 per cent last month, according to figures from the Office for National Statistics (ONS), compared with a 0.7 per cent decline that economists had forecast after an unexpected 1.2 per cent rise in sales in August.

Sales of clothes, shoes and textiles dropped by 2.3 per cent while trade in household goods, such as fridges and furniture, declined by 2 per cent, as homeowners cut back on “big-ticket” goods.

Supermarkets continued to benefit from the new trend among thrifty consumers to stay in rather than go out, sending sales up by 0.3 per cent during the month.

But evidence that they are not being spared from the overall downturn emerged as the ONS figures showed that the volume of sales at food stores dropped by 0.1 per cent between July and September, the first quarterly fall since records began in 1986.

Overall, annual growth in sales volumes fell from 3.3 per cent to 1.8 per cent — the lowest rate since February 2006.

Today's figures emerged as experts predicted that consumers were gearing up for a bargain basement Christmas, exacerbating the challenging conditions on the high street.

Vicky Redwood, of Capital Economics, said: "A much sharper slowdown is likely in the coming months. House prices are still falling, unemployment rising and credit conditions tightening.

"We expect overall real consumer spending to fall by around 1.5 per cent next year — with the retail sector perhaps seeing an even sharper drop in sales."

DSG International, which owns Curry's and PC World, this morning reported a 7 per cent fall in like-for-like sales in the first half of the year while Home Retail Group, which owns Argos and Homebase, said it was encountering its worst trading conditions since 1973.

Commenting on today's figures, Howard Archer, chief UK and European economist at Global Insight, said: "The correction in retail sales in September was less than expected following August's sharp gains and the suspicion remains that the official figures are overstating the strength of sales.

"The prospects for consumer spending look bleak as the financial crisis adds to the intense pressures already facing households."

The Office for National Statistics, which has come under fire for its retail figures which are often at odds with other surveys, said earlier this month that it would soon start to add a "margin of error" to its retail data.

Source: Times Online