* Sales fall worse-than-expected 0.8 pct from Sept
* Data signals possible GDP contraction in Q4
* Sends sterling lower against dollar, euro
* Policymakers had hoped for rebound in consumer spending
By Olesya Dmitracova and Sven Egenter
LONDON, Nov 15 UK retail sales fell in October
as shoppers bought less food and clothing, puncturing a consumer
spending revival that policymakers hoped would kick-start the
economy heading into 2013.
Sales volumes fell 0.8 percent on the month for an annual
rise of just 0.6 percent, the Office for National Statistics
said on Thursday. Both numbers were the weakest since April and
much worse than forecast, and sent sterling lower against the
dollar and the euro.
Food shops reported the biggest monthly decline in sales
since November 2011.
"I think a contraction in GDP is on the cards for the fourth
quarter," said Rob Wood, economist at Berenberg Bank.
Britons have suffered the biggest drop in disposable incomes
for more than 30 years as soaring food and fuel prices and
higher taxes have eaten away at pay packets that have risen
little or not at all.
The government and central bank had vested high hopes for
the economy on consumer spending, and retail sales had risen 0.5
percent month on month in September.
But a rise in inflation to a five-month high of 2.7 percent
in October put that in doubt because wages are rising at a much
"Retail sales had improved through 2012 as the fall in
inflation eased the squeeze on households, but as inflation goes
up that puts the brakes on retail sales for now," Berenberg
Bank's Wood said.
THE BIG SQUEEZE
On Wednesday Bank of England Governor Mervyn King said the
economy might shrink again in the final three months of the
year, having exited recession in the third quarter.
The BoE has also signalled that the gap between price and
wage rises is likely to persist, as it predicted that inflation
would remain above its 2 percent target over the next 18 months.
On Thursday a report by grocer Asda, based on
official data, showed that the amount of money households had
left after paying taxes and buying basic goods rose last month,
but much more slowly than in September.
Electrical retailer Comet fell into administration earlier
this month, becoming the latest high-street victim of Britons'
reluctance to spend.
The ONS said retail sales excluding fuel fell 0.7 percent on
the month and were 1.1 percent higher than in October 2011.
Between August and October, total sales inched up 0.2
percent from the previous three-month period.
On a more positive note, a survey by business lobby CBI
showed late last month that retailers expected a pick-up in
sales in November.
And on Sunday the country's biggest department store group
John Lewis said Christmas shopping had got off to a
In expenditure terms, retail sales account for roughly one
fifth of UK GDP.