October 26, 2017 / 11:31 AM / a year ago

UPDATE 1-UK retail sales plunge at fastest rate since 2009 - CBI

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    By Andy Bruce
    LONDON, Oct 26 (Reuters) - British retail sales plummeted in
October at the fastest pace since early 2009 when the country
was last in recession, according to a survey that could deepen
economists' doubts about the wisdom of raising interest rates
next week.
    With the economy having perked up slightly in the third
quarter, it looks very likely that the Bank of England will in a
week's time deliver Britain's first rate hike in more than a
    However, more than two-thirds of economists in a Reuters
poll published on Tuesday said now was not the time for a hike. 
    That majority view was bolstered by Thursday's data from the
Confederation of British Industry (CBI), which said its monthly
retail sales gauge fell to -36 this month from a two-year high
of +42 in September, marking its lowest level since March 2009.
    The reading was far below even the lowest forecast in a
Reuters poll of economists, most of whom expected a reasonably
modest slowdown in growth.
    While the CBI survey is extremely volatile from month to
month, the three-month average balance for reported retail sales
sank to -1 from +18 in September - a 13-month low.
    Despite Wednesday's encouraging third quarter GDP reading,
the outlook for the economy in coming months is mixed at best,
and further complicated by uncertainty around the Brexit
    JPMorgan economist Allan Monks said he tended to take
Britain's array of monthly retail surveys with a pinch of salt,
but added that Thursday's CBI survey raised concerns about
momentum in the consumer economy.
    "We don't think this changes the BoE decision next week. But
it could influence the degree of caution the (Monetary Policy
Committee) expresses about the near term outlook," he said in a
note to clients.
    The volume of orders that retailers placed with their
suppliers also contracted at the fastest rate since 2009, the
CBI said.
    In the past this measure has linked well with the monthly
IHS Markit/CIPS gauge of activity among consumer goods
    "It's clear retailers are beginning to really feel the pinch
from higher inflation," said Rain Newton-Smith, the CBI's chief
    "While retail sales can be volatile from month to month, the
steep drop in sales in October echoes other recent data pointing
to a marked softening in consumer demand."
    The Brexit vote in June 2016 led to a big fall in the value
of sterling, which has pushed up inflation, gnawing at
consumers' disposable income this year.
    Earlier on Thursday the British Retail Consortium reported
that retailers cut jobs over the past three months at the
fastest rate since comparable records began in 2008.
    It cited a combination of technological change and
government policies that pushed up employment costs as the main
reasons for the fall.

 (editing by John Stonestreet)
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