UK retail sales disappoint in September

UK retail sales disappointed against expectations in September with a decline of 0.8% over the month.

The 0.8% drop compared with market forecasts for a decline of just 0.1% and marked the largest monthly fall in retail sales since March.

Sterling slipped against the dollar on the news, trading 0.4% lower on the session.

Under pressure

Earlier this week, data showed UK inflation had climbed to 3% in September, up from 2.9% in August, the highest level since 2012.

Taken together, the readings indicate that UK consumers are feeling the ill effects of higher prices as real wages decline.

Wages declined by 0.4% in the second quarter of the year, despite a further fall in the rate of unemployment.

UK unemployment dropped to a 42-year low of just 4.3% in the second quarter.

Slowing momentum

The decline in retail sales for September is consistent with signs of slowing momentum across the UK economy as consumers and businesses struggle under the weight of Brexit related uncertainty.

Speculation has increased over recent weeks that the UK could leave the EU without a deal.

Second-quarter growth UK economic growth has also been revised down to 1.5% versus the prior 1.7% year-on-year estimate.

However, against the backdrop of rising inflation, Bank of England Governor Mark Carney has warned that UK interest rates could imminently rise.

Market reaction

Sterling fell in response to the data. Against the euro, the pound was down 0.7% at €1.1125 and versus the dollar it fell 0.4% to $1.3157.

By midday, the London stock market was lower, with the FTSE 100 down 0.3% at 7,517.25.