U.K. retail sales unexpectedly drop in Oct., pound falls

Retail sales with auto fuel for the month of October showed 0.7% drop, compared to both prior and expected readings of 0.6% and 0.0% respectively, where the annual reading edged up 1.8% from a revised of 2.0%.

Data showed that textile, clothing & footwear led the decline with a drop of 2.4%, while food-store sales soared 0.2%.

The reading excluding auto fuel also slipped 0.6% from a revised of 0.8% while annual reading soared 2.3% from a revised of 2.5%.

Following the release of the retail sales figures, the pound widened its losses against the U.S. dollar to hit to a low of 1.5989 from the session’s high of 1.6062.

It seems that retail sales are not taking advantage of the ease in inflation and improvement in unemployment as consumer spending is still not strong enough.

CPI for the year ended October dropped to 2.2%, the smallest increase since September 2012, from 2.7% in September.   

“CPI inflation is projected to remain around its current level of 2.2% in the near term and fall back a little further during 2014, aided by the recent appreciation of sterling,” the BOE inflation report released yesterday said. 

On the other hand, ILO unemployment for the three months ended September slipped to 7.6% from 7.7%, while jobless claims for the month of October showed a drop of 41,700 to 1.31 million.

BOE governor Mark Carney said on Wednesday “unemployment rate will fall faster than it expected three months ago, where there is a "two in five chance" that it could be 7% at the end of 2014.”

The BOE has revised up its growth forecast to 1.6% this year and 2.8% in 2014. “Recovery has finally taken hold,” Carney said.