UK retail sales saw an unexpected decline in September 2006, sharpest drop since the beginning of the year (2006).

British retail sales witnessed a surprising decline in September 2006, as experts blame high utility prices, high interest rates & less discounting for the unexpected drop, according to The Office for National Statistics.

Retail sales volume till September from July (2006) was 0.8 %, higher than previous 3 months. Three-month growth rate was 0.9 % for food retail stores & 0.5 % for non-food retail stores, lowest growth rate since April 2006 for non-food retail stores. Growth of all sectors within non-food retail stores continued an upward trend except household goods retail stores as sales declined by 0.4%. Non-store retailers witnessed highest growth rate of 1.7% with clothing retail stores sales up by 1.4 %. Volume of total sales increased by 3.8 % from July to September (2006), compared to same duration in 2005.

Volume of total sales declined by 0.4 % between August & September 2006, first decline since the start of the year. Major drops came from non-store retailers & household goods retail stores, as sales dropped by 4.7 % & 2.3 % respectively, after a strong growth in August 2006. Sales of non-specialized stores & clothing stores also declined balancing 0.8 % rise for food retail stores. However, compared to September 2005, retail sales volume went up by 3.2 % in September 2006.

"Decline in volume sales is due to recent price hikes. High mortgage payments & rising inflation rates have curbed customer spending. A rise in interest rate is expected in November (206)", said an analyst at RNCOS.

From July to September, unadjusted retail sales value was 3.9 % more than the same time in 2005. Sales' weekly value, on an average, was US$ 5.93 Billion, 3.9 % higher than September last year. Food retail stores grew by 4.8 % and non-food stores increased by 2.9 %.

Implied deflator for retail sales, ratio of sales value to the sales volume, indicates first overall price rise in retail goods since 4 years. Implied deflator's annual growth rate was 0.6 %, highest from June 2001 & positive for the 1st time since Jan' 2006.