20 Nov 2014
Data released today by the Office for National Statistics (ONS) showed UK retail sales volumes rising by 4.3% year-on-year in October, the fastest growth rate since April. This is the nineteenth consecutive month of annual increases, highlighting the strength of the retail sector despite the pressures faced by household budgets.Rising wage growth is likely to have been one factor supporting the buoyant retail sector, as the latest data showed average regular pay in the three months to September increasing at its fastest rate since March.
Fierce price competition in the sector is also helping to boost purchases. Prices at retailers overall (excluding petrol) declined over the past year by 1.2%, while prices at department stores and household goods stores fell back at the more rapid rate of 1.8%.
Looking ahead, retail sales are likely to continue to see robust growth. Wages are expected to strengthen further, as employee bargaining power rises alongside falling unemployment. At the same time, the general inflationary environment will remain weak as global commodity prices continue to ease. This will take the heat off the cost to consumers of petrol and utilities, helping to boost household spending power. In addition, competition among retailers could well keep store prices subdued. As a result, the consumer is likely to be the key driver of UK expansion in 2015, with a weak global environment holding back other parts of the economy, such as exports.
