UK retail sales higher in October

Retail sales are expected to pick up ahead of the rise in VAT next year

UK retail sales rose in October, ending two months of declines, official figures have shown.

October's sales were 0.5% higher than the month before, said the Office for National Statistics (ONS), a bigger rise than analysts had expected.

However, when compared with a year ago, October's sales were down 0.1%, the first year-on-year fall since January.

A separate report from the CBI found that UK factory orders declined at a slower-than-expected pace in November.

'Unspectacular' growth

The main driver behind the sales rise in October came from non-food stores, the ONS said, with sales at clothing and footwear stores up by 0.6%.

Howard Archer, chief UK and European economist at IHS Global Insight, described October's rise as "decent but unspectacular".

"Given the importance of consumer spending to the overall economy, the decent improvement in retail sales in October is broadly supportive to hopes that GDP growth will hold up well in the fourth quarter," he said.

Analysts are expecting a surge in spending towards the end of the year, ahead of the planned rise in VAT to 20%. However, after that, prospects are more uncertain.

"Further out... the concern remains that consumers will rein in their spending in the face of serious headwinds. This would clearly limit overall economic growth," Mr Archer said.

Inflation pressures

The CBI business group's latest Industrial Trends Survey found that demand for UK-made goods had improved in November.

The survey found 21% of manufacturers said total orders were above normal, while 36% said they were below.

The balance of -15% was a big improvement on October's balance of -28% and was also better than analysts' expectations.

However, the CBI survey also found that manufacturers were only expecting "modest" output growth in the months ahead.

The CBI also noted that inflationary pressures were "a concern, with companies saying they will be increasingly forced to pass on at least part of their rising costs in the form of higher prices".

Figures released on Tuesday showed Consumer Prices Index (CPI) inflation rose to 3.2% in October.

And one member of the Bank of England's monetary policy committee (MPC), Andrew Sentance, has been pushing for several months for a rise in interest rates to cool inflation.

However, most analysts expect the MPC to keep the Bank Rate unchanged at 0.5% for many months to come.