Flat UK November retail sales raise risk of GDP contraction in fourth quarter

Thu Dec 20, 2012 5:48am EST
 
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By David Milliken and Olesya Dmitracova

LONDON (Reuters) - British retail sales were flat in November, despite a boost from tablet computers, reflecting still weak consumer confidence and increasing the chance that the broader economy will contract in the final quarter of 2012.

Retail sales volumes were stagnant on the month to give an annual rise of just 0.9 percent, the Office for National Statistics said on Thursday - below economists' forecasts for both monthly and annual sales growth.

The figures follow a shock fall in retail sales in October and suggest underlying weakness in much of Britain's services sector, raising the likelihood the economy will shrink in the fourth quarter, something the Bank of England views as likely.

"Consumers are still keeping their powder dry," said Peter Dixon, UK economist at Commerzbank. "Fourth-quarter activity as a whole is going to be fairly weak ... A negative (GDP) figure can't be ruled out," he added.

October services data due on Friday will give the first clear glimpse of the health of the largest sector of Britain's economy in the final quarter of 2012.

Britain emerged from its second recession since the financial crisis in the third quarter of this year, and the economy faces headwinds from the euro zone crisis, government spending cuts and relatively high inflation.

The one bright spot for retail sales was in household goods stores, where volumes rose by 3.8 percent on the month, the biggest jump since February 2010. The ONS said this was driven by electricals such as Apple's AAPL.O new iPad Mini tablet computer.

WEAK SPENDING   Continued...

 
Christmas shoppers crowd Oxford Street in central London December 19, 2012. REUTERS/Neil Hall