U.K. Retail Sales Rise for First Time in Three Months

By Svenja O’Donnell

Dec. 18 (Bloomberg) -- U.K. retail sales unexpectedly rose in November for the first time in three months as higher demand at food and discount stores offset declines elsewhere.

Sales increased 0.3 percent on the month after falling by the same amount in October, the Office for National Statistics said today in London. The median forecast in a Bloomberg News survey of 29 economists was for a 0.6 percent drop. On the year, sales rose 1.5 percent, the least since February 2006.

“These figures are very volatile,” said George Buckley, chief U.K. economist at Deutsche Bank AG in London. “Consumption and retail sales will weaken very sharply in 2009. We’ll see much weaker data going forward.”

The Bank of England considered cutting the benchmark interest rate to the lowest ever this month as the economy sank deeper into a recession, minutes of the Dec. 4 decision showed yesterday. Unemployment claims rose at the fastest pace in 17 years last month as companies slashed jobs.

The pound extended its slide against the euro against the release of the data, dropping to 95.05 pence per euro, and has now dropped 13 percent in the past month. It rose as much as 0.5 percent against the dollar.

Food sales increased by 0.3 percent on the month. Sales at non-food stores rose by 0.2 percent as demand at household goods shops compensated for declines in the rest of the category. Retailers sold more electrical items and discount stores increased sales, the statistics office said.

Aldi Gains

Aldi Group and William Morrison Supermarkets Plc led market-share gains among food retailers in the last three months as consumers turned to chains offering lower prices, Taylor Nelson Sofres Plc said on Dec. 9.

Non-specialised store sales, the category which includes department stores, fell 3.8 percent in the three months through November to the lowest level since records began in 1986, the statistics office said.

Retailers including Marks & Spencer Group Plc have offered discounts to attract shoppers and weather the recession.

A separate gauge of sales fell to the lowest since at least 1983 in December, the Confederation of British Industry said yesterday. The contrast between official data and survey evidence raises questions on the statistics office’s reporting, said James Shugg, a senior economist at Westpac Banking Corp.

“There’s a lot of doubt about the reliability of the figures,” he said.

Woolworths Group Plc and MFI Retail Ltd. went into administration late last month. Woolworths’s U.K. stores are all expected to close by Jan. 5 unless a buyer is found, the company’s administrators said yesterday. The company’s union said 30,000 jobs will be cut as a result of he closures.

The retail price deflator, a measure of cost changes in shops, showed a 0.2 percent annual increase, the statistics office said.

The benchmark U.K. lending rate has dropped 3 percentage points since October to the current 2 percent. The rate will drop another half-point to 1.5 percent at the next decision on Jan. 8, the median of 23 economists’ predictions in a Bloomberg News survey shows.

To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net.