Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
British retail sales rebounded less than expected in November, capping a string of disappointing data for the UK economy.
The quantity of goods bought rose 0.2 per cent between October and November, as weakness in clothing sales offset stronger sales at supermarkets, the Office for National Statistics said on Friday.
November’s figure was below the 0.5 per cent expected by economists and followed a 0.7 per cent contraction in October. Economists had cautioned that November’s figure would be affected by Black Friday falling in December this year, but the ONS said the figures accounted for the shift in timing.
Hannah Finselbach, ONS senior statistician, said: “For the first time in three months there was a boost for food store sales, particularly supermarkets. It was also a good month for household goods retailers, most notably furniture shops.
“Clothing store sales dipped sharply once again, as retailers reported tough trading conditions.”
Clothing stores sales volumes fell 2.6 per cent in November following a 3.5 per cent drop in October, leaving sales in the sector at their lowest level since January 2022.
Alex Kerr, UK economist at Capital Economics, said November’s rebound failed to fully reverse October’s fall and sales volumes would need to rise by 1.1 per cent in December to prevent an overall contraction in the fourth quarter. This means that “the risk of a contraction in overall GDP in Q4 remains”.
The modest rebound follows a run of grim economic data. GDP unexpectedly contracted for a second consecutive month in October, underlining the economy’s slowdown just as inflation has begun to pick up.
Inflation rose to 2.6 per cent in November, ONS figures showed this week, while the S&P Global PMI indices pointed to slowing activity and falling levels of employment.
Many economists still expect improvements in sales next year.
Elliott Jordan-Doak, economist at the consultancy Pantheon Macroeconomics, said: “Consumer confidence is steadily recovering from the hit taken in the months leading up to the Budget, and we think that recovery has further to run as real incomes continue to rise and the Monetary Policy Committee cuts interest rates next year.”
Separate figures also published on Friday showed the UK government borrowed £11.2bn in November, less than economists had forecast and £3.4bn less than in the same month a year earlier.
The figures will come as a modest relief to chancellor Rachel Reeves as she attempts to get a grip on the public finances. But her budgetary plans still remain under strain because of weakening growth and higher borrowing costs, economists warned.
Reeves is planning to issue a statement to MPs on March 26 alongside new fiscal and economic forecasts from the Office for Budget Responsibility, and she has made it clear that it will not include any new rises in taxes or borrowing.
The most recent OBR forecasts show she is set to meet her main fiscal rule that day-to-day spending is funded only by tax by 2029-30 by a slender, £9.9bn margin, however.
“The weakening in the economy and recent rises in market interest rates suggest the government will still struggle to bring the deficit down as quickly as planned,” said Ruth Gregory, of Capital Economics.
“That raises the chances that extra revenue-raising tax hikes or spending cuts will be required.”
