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UK shoppers unexpectedly rein in spending, adding to slowdown signs in economy

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By Reuters
UK shoppers unexpectedly rein in spending, adding to slowdown signs in economy
FILE PHOTO: Shoppers carry shopping in plastic bags in the West End, in London, Britain December 27, 2018. REUTERS/Henry Nicholls   -   Copyright  HENRY NICHOLLS(Reuters)

LONDON (Reuters) – British consumers, whose spending has helped the economy through the Brexit crisis, cut back on their shopping in October, according to official data which added to signs of weak overall economic growth.

In the three months to October, sales rose at the weakest pace in a year-and-a-half, the Office for National Statistics said on Thursday.

Monthly retail sales volumes unexpectedly fell, down by 0.1%, compared with a median forecast for 0.2% growth in a Reuters poll of economists.

Compared with October 2018, sales were up by 3.1%, again weaker than the Reuters poll forecast of 3.7%.

Looking at the three months to October as a whole, the ONS said retail sales rose by 0.2% compared with the previous three-month period, the weakest rise since the three months to April 2018, and were 2.9% higher than a year before.

“Department stores rebounded in October, driven by promotional events and an earlier introduction of Christmas lines,” an ONS spokesperson said. “However, their sales still remain significantly down over the longer term.”

The figures contrasted with a survey by an industry group, the British Retail Consortium, which showed a pick-up in spending last month, though its measure of average sales growth over the past year was weak too.

Until recently consumers appeared to have largely taken Brexit in their stride, helped by weaker inflation and stronger growth in wages.

That has aided the world’s fifth-biggest economy at a time when many companies have been cutting back on investment because of uncertainty about Brexit.

Below-target inflation, the strongest rise in wages since 2008 and some of the lowest unemployment rates since the mid-1970s have continued to boost household incomes, although wages are still lower than before the financial crisis once inflation is taken into account.

But there have been signs that consumers are turning more cautious as Britain’s political crisis drags on and an election approaches on Dec. 12.

Supermarket group Sainsbury’s <SBRY.L> said last week that it expected to trade well in the run-up to Christmas but feared a consumer hangover in early 2020 if Brexit is unresolved.

Baby products retailer Mothercare <MTC.L> is set to close its British stores with the loss of at least 2,500 jobs under the weight of the pressures plaguing the retail sector, including online competition.

(Reporting by David Milliken and William Schomberg)