October 27, 2020

Chart of the Week: UK retail sales strong, but fresh lockdowns could stifle recovery

by Fathom Consulting.

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UK retail sales reported their fifth consecutive month-on-month growth in September, rising by a surprisingly large 1.5% from August. This represents a 4.7% increase from the same period last year, much higher than the 0.4% to 0.5% rise which had been forecast. The growth was fuelled, in part, by increased food sales as the number of people eating out fell back after the ‘Eat Out to Help Out’ scheme ended. Non-food stores have also seen their sales rise; they are currently 1.7% higher than they were in February.

The pandemic has seen a large growth in the online share of sales. After peaking at 33.9% in May, the proportion of online sales stood at 27.5% in September, significantly larger than the 20.1% in February. Online sales have risen 53% in the year leading up to September. With an increasing number of counties in the UK entering fresh lockdowns, this trend looks set to continue.

Fresh lockdowns invariably mean the UK’s recovery will struggle to maintain its pace. The latest IHS Markit/CIPS Flash UK Composite PMI report for October confirms this, suggesting growth in October is at a four-month low as the index edges closer to reporting a contraction. This is despite a boost in export orders ahead of the expected Brexit disruption. It looks as though the UK economy is stepping into the final quarter of 2020 on a weak footing.

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