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Shoppers turn to charity stores as prices climb

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High street sales are under pressure amid weak wage growth

By John-Paul Ford Rojas, Business Reporter

Shoppers turned to charity shops and other second-hand outlets last month as retail sales struggled amid rising store prices.

Sales volumes rose by just 0.3% compared to a dire September and were down 0.3% compared to the same month last year – the first year-on-year decline since 2013.

Food sales led the downturn, with their sharpest year-on-year fall for five years, as the grocery sector saw the biggest annual price increases, figures from the Office for National Statistics (ONS) showed.

Clothing retailers also suffered, suggesting mild October weather delayed purchases of winter outfits, the ONS said.

The figures were slightly ahead of City expectations though growth was led by second-hand outlets – a category including charity shops, auction houses, antiques and fine art dealers.

ONS senior statistician Kate Davies said: "We are continuing to see an underlying picture of steady growth in retail sales, although this October suffered in comparison with a very strong October in 2016."

The figures come as food prices are rising at their fastest pace in four years, while the wider Consumer Prices Index (CPI) is running at a five-year high of 3%.

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That is well ahead of wage growth and means that in real terms pay has been falling for seven months in succession.

Meanwhile, figures this week showed UK employment fell in the three months to September, prompting concerns from some experts that an extended period of jobs growth could be coming to an end as the wider economy stutters.

Ruth Gregory, UK economist at Capital Economics, said: "With real incomes under pressure from subdued nominal wage growth and rising inflation, it isn't surprising that spending growth has lost further momentum.

"That said, there are reasons to think that sales growth won't slow much further.

"For a start, with unusually warm weather hitting purchases of winter clothing ranges, there is scope for a rebound in clothing sales over the coming months now the weather has turned more seasonal."

But James Smith, economist at ING Bank, said that the squeeze on consumers was likely to mean a continued "cautious approach to spending for at least a couple more quarters".

"Sluggish growth is a key reason why we think another rate hike from the Bank of England next year is not fully guaranteed," he added.

Last week, the British Retail Consortium said trading levels in the run-up to Christmas were a "cause for concern" with non-food sales performance at the worst level since its records began in 2011.

Meanwhile, supermarket group Sainsbury's has reported a slowdown in quarterly sales growth while Marks & Spencer's has faced a tougher period for food sales, until recently the stand-out division of the business as clothing struggles.

Ben Brettell, senior economist at Hargreaves Lansdown, said: "As ever with retail, the Christmas period, which kicks off with Black Friday on 24 November, will be crucial."

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Source – News.sky.com

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