September 19, 2019 / 9:26 AM / a month ago

UPDATE 1-Drop in online shopping knocks UK retail sales in August

    * UK retail sales dip 0.2% in August, first fall since May
    * Online sales slide after Amazon Prime Day boost in July
    * No sign Brexit worries weighing heavily on consumer
spending
    * Next blames warm weather for recent weak autumn clothing
sales

 (Adds economist reaction)
    By David Milliken and Jonathan Cable
    LONDON, Sept 19 (Reuters) - British retail sales
unexpectedly fell in August after shoppers bought less online
than the month before, when an annual promotion by Amazon
appeared to have encouraged them to splash out, official figures
showed on Thursday.
    The figures gave little obvious sign that either the
possibility of a no-deal Brexit on Oct. 31 or a fall in sterling
over the summer had dealt a visible blow to consumer spending,
which has solidly supported British growth in recent years.
    Monthly retail sales volumes dipped by 0.2%, the Office for
National Statistics said, compared with an average forecast for
a flat reading in a Reuters poll of economists and the first
fall in three months.
    "No cause for alarm," economist Samuel Tombs of Pantheon
Macroeconomics said in a note to clients. "The modest fall in
retail sales volumes does not change the overall picture of
solid momentum in household spending."
    British consumers appear to have largely taken the prospect
of leaving the European Union in their stride, helped by weaker
inflation and stronger growth in wages that are now rising at
their fastest rate in more than a decade.
    On Thursday the boss of Next        , one of Britain's
biggest clothing retailers, reported a rise in profits and told
Reuters that disappointing sales in recent weeks appeared to
reflect unusually warm weather, rather than Brexit jitters.
            
    The category of 'non-store retailing' - predominantly online
shopping - dropped by 3.2%, the biggest decline since August
2015, and came a month after Amazon held its annual 'Prime Day'
promotion which helped boost sales by 7.6% the previous month.
    Compared with August 2018, sales were up by 2.7%, slowing
from growth of 3.4% in July and again the weakest since May. 
The Reuters poll had pointed to annual sales growth of 2.9%.
    Looking at the three months to August as a whole, sales rose
3.3% on an annual basis, broadly in line with their average over
the past year, and there was no market reaction to the data.
    The figures broadly chimed with a British Retail Consortium
survey that showed spending in August was flat on a year
earlier, as shoppers cut non-essential spending. 
    But the picture is less bleak than that presented by the
Confederation of British Industry, which said its members
reported the biggest fall since 2008 in its gauge of retail
sales in August, as sentiment crumbled in the sector.
    Many businesses are more cautious than consumers as
Britain's political crisis drags on, and fear that a no-deal
Brexit could lead to significant disruption to imports of fresh
food and other goods.
    Department store and supermarket operator John Lewis said
last week a possible no-deal Brexit could worsen already
difficult trading conditions after first-half operating losses
at the group's department stores widened and that the impact
could be "significant".             
    Separately on Thursday the Organisation for Economic
Co-operation and Development said that if Britain leaves the EU
without a deal, its economy was likely to be 2% smaller than
otherwise in 2020-2021, pointing towards a recession, even if
its exit is relatively well managed.             

 (Reporting by David Milliken; Editing by Toby Chopra and Angus
MacSwan)
  
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