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As retail sales fall, will Christmas miracle save the day?

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Retail sales slowed down in October, falling by 0.7 per cent compared to the previous month, figures from the Office for National Statistics show.

A crisis hasn’t yet been reached, as retailers are still ahead of last year’s figures, but a boost over the Christmas period would be welcomed by all retailers.

Compared to October 2012, the quantity of goods bought last month increased by 1.8 per cent, while the amount spent (i.e. total value), grew by 2.5 per cent in the last 12 months.

Non-food stores (e.g. department stores, textiles,clothing & footwear, household goods and other stores) and non-store retailers (e.g. mail order, catalogues and market stalls) provided the strongest upwards contributions, seeing year-on-year growth of 2.7 per cent and 16.3 per cent respectively, according to the Office for National Statistics. 

Food stores and petrols stations were the biggest fallers, with numbers falling by 0.3 per cent and 2.4 per cent.

The breakdown across the retail industry shows that for every pound spent in the retail industry in October 2013, 42p was spent in food stores, 41p in non-food stores, 6p in non-store retailing and 11p in petrol stations.

The ONS report, out this morning, also points out that online sales are growing as a proportion of the total retail spend. Indeed, online sales in October grew by 1.1 per cent compared to a year ago, and now account for 10.5 per cent of all retail sales. “Feedback from retailers suggests online-specific promotions were the contributing factor to this increase,” says the report.

Jeremy Cook, chief economist at currency brokers World First, said that economists have been worried about the divergence in recent growth figures – a split between growth driven by the housing market and service businesses that specialise in B2B works.

“These B2B companies have been driving service sector growth onwards in recent months, but the other side of the service sector – the retailing segment – has been left behind,” he explained. 

“The reasons behind this are numerous, but the major factor is clearly the impact of falling real wages. Despite the recent, larger than expected fall in in CPI, wage growth remains very poor in the UK. It is unlikely to increase while productivity gains, instead of job creation, remain the key to the acceleration of output. 

“High Street stalwarts have warned us that Christmas trading could be difficult and the cost of living crisis will not make it any easier…”

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