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Thursday, September 15, 2005

UK Retail Sales Disappoint

Here's one for our New Economist. UK retail sales were flat in August and at the same time the July numbers were also revised downwards:

U.K. retail sales stagnated in August after dropping more than previously estimated in July as consumers spent less in food stores.

Sales were unchanged from July, when the drop was revised down to 0.6 percent, the Office for National Statistics said in London today. Economists had predicted a gain of 0.3 percent, according to the median of 34 estimates in a Bloomberg survey. Annual sales growth slowed to 0.8 percent, from a revised 1.3 percent.

Consumers have been curbing spending this year as record oil prices push up household bills and house prices stagnate. The central bank reduced its benchmark interest rate for the first time in two years in August after growth slowed to an annual 1.8 percent, the lowest since the first three months of 2002.

This follows the news yesterday that unemployment continues (slowly) to rise. This is hard to read since the numbers employed (aha, demography again) actually went up:

The labour market continued to tread water over the summer with another small rise in unemployment, a modest rise in the size of the workforce and bonuses pushing up average earnings, official figures showed on Wednesday.

The claimant count, which measures unemployment by totting-up those out of work and claiming benefit, increased by 1,600 to 866,000, the seventh month in a row that it has edged higher.

As the FT also points out the proportion of people of working age who wanted to work rose to an impressive 78.6 per cent between April and July, so with such comparatively low unemployment the general picture is that the UK has a very well-functioning labour market. However the fact that wages rose while spending didn't needs to be watched. I suspect this reflects a decrease in the rate of increase in new demand for credit, something which could be associated with the end of the housing boom.

Bottom line: nothing dramatic, but this sure needs watching carefully. Even the US 'long boom' of the ninetees did eventually come to an end.

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