U.K. retail sales unexpectedly increased in August for a second month as stores attracted shoppers with discounts on clothing and footwear.
Sales climbed 1.2 percent after rising 0.9 percent in July, the Office for National Statistics said today in London. Economists forecast a 0.5 percent decline, according to the median of 27 estimates in a Bloomberg News survey. On the year, sales increased 3.3 percent.
Unemployment rose the most in 16 years in August and the housing slump deepened as the credit squeeze intensified enough to prompt HBOS Plc, the nation's biggest mortgage lender, to agree to a takeover today. The Bank of England has still refrained from cutting interest rates since April as policy makers count on slowing growth to help control inflation.
“Some of this is the usual volatility in the data, but overall the picture for the consumer is very weak,'' said Nick Kounis, chief European economist at Fortis in Amsterdam and a former U.K. Treasury official. “The Bank of England will want to see inflation risks ease before it starts cutting rates.''
The pound was little changed against the dollar after the report, trading at $1.8203 as of 10:57 a.m. in London.
Food sales fell 0.2 percent on the month, while non-food sales increased 2.1 percent, the statistics office said. For the three months through August, sales dropped 0.8 percent, the most since 1991. Statistics officials said that this decline should be interpreted with caution because of the record monthly increase reported in May.
Sales of textiles, clothing, and footwear increased 4.1 percent from July, the statistics office said. Prices of those items dropped 2.5 percent from a year earlier and have shown an annual decline in every month since July 2007. Sales at household goods stores also rose, with a gain of 1.7 percent.
Kingfisher Plc, Europe's largest home-improvement retailer, rose the most since 2000 in London trading today after reduced discounting helped first-half profit to top analysts' estimates even as U.K., Irish and Spanish house prices slid no fax payday loans.
Claims for unemployment benefits rose by 32,500 in August, the most since 1992, the statistics office said yesterday, as companies from banks to homebuilders cut jobs while the global credit squeeze worsened. House prices fell 12.7 percent from a year earlier, HBOS said on Sept. 4.
The U.K. economy will shrink in the third and fourth quarters, according to a Sept. 10 forecast by the European Commission. Growth stalled in the second quarter as consumer spending dropped for the first time in three years.
Lloyds TSB Group Plc agreed to buy HBOS today to rescue it from the worsening credit crisis. The Bank of England joined the Federal Reserve, European Central Bank and counterparts around the world in offering an additional $180 billion today to markets facing their worst crisis since the 1920s.
Bank of England Governor Mervyn King said in a letter to Chancellor of the Exchequer Alistair Darling on Sept. 16 that policy makers are determined to tame consumer prices inflation jumped to 4.7 percent in August, more than double the bank's 2 percent target.
The annual retail price deflator, which shows cost changes in stores, rose 0.9 percent on the year as food prices increased 6.6 percent, the most since 1991, the statistics office said.
German discount retailers Aldi Group and Lidl kept increasing their share of the U.K. grocery market this summer as food inflation accelerated, according to a Sept. 16 report from market researcher Taylor Nelson Sofres Plc.
The rate-setting Monetary Policy Committee has “become firmer in its belief that a period of muted economic growth is necessary to dampen pressures on prices and wages and return inflation to the target in the medium term,'' King said.
Eight of the nine-member rate-setting panel voted to keep borrowing costs at 5 percent, minutes of the Sept. 4 decision published yesterday show. David Blanchflower wanted a half-point cut, the biggest since 2001.