Although it’s not one of the more important times of year for retail sectors, with Christmas soon on the horizon, October can be used as another important key indicator of the strength of the UK retail sector.
By Joshua Raymond, Chief Market Strategist at City Index Group
Figures released late last month from the Office for National Statistics suggest that things could be better, as a shock 0.7% fall in total sales was recorded compared to the previous month.
As a number of eager shoppers desperate to get their shopping for Christmas out of the way would have been likely to head to the high street or go online to beat the mad rush, the headline stat comes as a major surprise, but why?
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Looking into it, the sales figures reflect continuing volatility caused by fragile consumer confidence against a backdrop of a small recovery in the wider economy.
Unseasonable weather
One possible cause of this unexpected drop for the retail sector could be unseasonably warm weather during October. For much of the month, the weather didn’t really act as a reminder that winter was on its way, dissuading many consumers from splashing out on winter clothes such as jumpers, gloves and coats.
Another possible explanation is that many consumers are likely to have waited until later on in the year to make big purchases, especially in anticipation of special offers from retailers trying to drum up sales in time for ‘Black Friday’.
This is a hugely important day where retail firms try to kick off their Christmas campaign as well as ‘Cyber Monday’, when online stores offer mass discounts. However, October wasn’t all about bad news for the sector.
Clicking into gear
For only the third time in recent history, online sales accounted for more than 10% of total sales made in the UK. As this milestone has been reached, it suggests that online retailers are among those best placed to do well in the coming months, possibly at the expense of high street firms battling to stay relevant.
As sales grew year-on-year online by 15.9%, this shows how seriously retail firms need to take going online. With the weather taking a turn for the worse, many shoppers are likely to get what they need in terms of gifts from the comfort of their living room as opposed to going out.
Department stores were among the biggest growers, seeing sales jump by 39.3% compared to October 2012.
Joshua Raymond is Chief Market Strategist at City Index Group specialising in European equities and Forex
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