U.K. retail sales rose in October for the first time in three months as consumers bought more sports gear and games and brought forward spending before next year’s increase in value-added tax on sales. Sales climbed 0.5 percent from September, when they fell by the same amount, the Office for National Statistics said today in London. Economists predicted a 0.4 percent increase, according to the median of 22 forecasts in a Bloomberg News survey. On the year, sales fell by 0.1 percent. The economy grew twice as much as forecast in the third quarter and has shown signs of sustaining momentum before the government implements the deepest budget cuts since World War II. The Bank of England’s Monetary Policy Committee split three ways for a second month in November as it kept stimulus unchanged at 200 billion pounds ($318 billion), minutes showed yesterday. “Retail sales have been surprisingly resilient,” Jonathan Loynes, chief European economist at Capital Economics Ltd. in London, said before the report. “The VAT hike could bring some spending forward,” though “things are slowing again now and we have this huge fiscal squeeze happening.” The pound was little changed after the report and separate data from the statistics office showing a larger-than-expected budget deficit in October. The currency was at $1.5952 as of 9:33 a.m. in London. The yield on the benchmark two-year government bond was up 2 basis points at 1.079 percent. Sales Tax There was anecdotal evidence of accelerated spending at household goods stores and department stores before Chancellor of the Exchequer George Osborne’s increase in sales tax from 17.5 percent to 20 percent due in January, the statistics office said. Food stores sales increased by 0.1 percent, and non-food stores had a 0.3 percent gain, the statistics office said. Clothing, automotive fuel, and non-store retailing all showed increases on the month. Excluding fuel, sales increased by 0.3 percent on the month. Arcadia Group Ltd., the U.K. fashion retailer owned by billionaire Philip Green, said today it is cautious about the year ahead as sales growth slowed in the first weeks of the fiscal period. Arcadia owns the Topshop chain, which sells clothes such as a faux-fur hooded gilet for 70 pounds targeted at young, fashion-savvy customers. ‘Record Year’ “Topshop, Topman are still good, both delivered a record year,” Green said. “Wallis has had a good year, Dorothy Perkins has been steady. Menswear has been tougher. Probably our toughest brand has been Evans,” which sells bigger sizes. Green said he plans to grow the business this year, though he remains cautious, citing the increase in value-added tax, raw materials and wages. Osborne is raising the levy and cutting half a million jobs to bring down Britain’s record deficit. Higher commodity costs helped push up the inflation rate to 3.2 percent in October, breaching the government’s upper 3 percent limit and forcing Bank of England Governor Mervyn King to write his fourth letter to the Treasury this year. The retail deflator, a measure of changes in shop prices, showed a 2.2 percent annual gain in October, the most in five months, the statistics office said today. To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net

Source