In a surprising turn of events, retail sales saw an increase in September, indicating that households are still spending despite concerns over potential tax hikes in the Budget. The Office for National Statistics (ONS) released figures showing a 0.3 per cent rise in retail sales volumes for September, contrary to economists' predictions of a 0.4 per cent drop.
This resulted in a yearly increase of 3.9 per cent, marking the highest annual rise since February 2022. "Retail sales grew in September as tech stores reported a notable rise in sales," stated ONS senior statistician Hannah Finselbach, as reported by .
She added, "These were only partially offset by a poor month for supermarkets, where retailers said bad weather and households continuing to cut back on luxury food items hit sales," The most significant sub-sector growth came from 'other non-food stories', which saw a 5.5 per cent rise in September. Computer and telecommunications retailers made the most substantial contribution, a trend some economists attribute to back-to-school spending.
However, supermarket sales volumes experienced a 2.4 per cent decline, with retailers citing unseasonable weather and ongoing consumer cutbacks on luxury food items as contributing factors. Despite these challenges, the data suggests consumers remain willing to spend amidst fears of potential tax increases in the Budget.
It is rumoured that Chancellor Rachel Reeves plans to raise taxes and reduce spending by £40bn in an effort to stabilise the º£½ÇÊÓƵ's public finances.
Recent surveys of consumer sentiment have shown a decline as households brace themselves, however, this morning's data indicates that consumer behaviour remains unchanged for now.
"Whilst households may be apprehensive about potential tax increases in the Budget on 30th October, these fears are not yet impacting their spending decisions," stated Alex Kerr, º£½ÇÊÓƵ economist at Capital Economics.
Kerr posited that retail expenditure is likely to persistently rise as households experience an improvement in real incomes, even in the face of potential tax hikes in the Budget.
According to the ONS, the data reveals a positive trend for retail sales, with a growth of 1.9 per cent in the quarter. This ties with the quarter to March as the largest increase since July 2021.
The ONS reported that this quarterly increase was seen across all main sectors. Compared to the same period last year, there was a 2.6 per cent increase, marking the highest since March 2022.
"The figures suggest that the economy is more robust than was thought," commented Neil Birrell, chief investment officer at Premier Miton Investors.
