Vacuum cleaner splurge pushes up UK retail sales

http://www.theguardian.com/business/2014/sep/18/vacuum-cleaner-splurge-eu-ban-uk-retail-sales

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A rush to buy energy-guzzling vacuum cleaners ahead of EU environmental laws banning them helped retail sales push ahead 0.4% in August compared with the previous month, according to official figures.

The Office for National Statistics said bumper sales of high-powered vacuum cleaners played a major role in keeping shop tills ringing alongside a boost to furniture sales.

Textiles, clothing and footwear also recorded robust growth in August as cooler weather prompted greater interest in the autumn fashions.

Analysts described the rise as modest and largely the result of heavy competition, which is likely to restrict profitability in the sector.

The quantity of goods sold was 3.9% higher than July, showing that shoppers were busy in August. A price war among food retailers, however, and heavy competition in other sectors kept the rise in values at 0.4%.

Low wage increases that have maintained a five-year run of falling real incomes were also blamed for the bargain-hunting mentality of most shoppers, especially in food stores, which account for 42p of every £1 spent.

Howard Archer, the chief UK economist at IHS Global Insight described the figures as robust."It is evident that many retailers continued to encourage consumers to spend by engaging in discounting and promotions in August," he said.

He pointed out that the ONS's price deflator, which is a proxy for sales prices, fell by 1.2%. "While this reflected a sharp fall in petrol prices, it is notable that the retail sales deflator excluding petrol was down by 0.7% year-on-year with food stores' prices falling by 0.1% as the supermarket pricing war continued."

Less volatile figures showing the last three months compared with the three previous showed growth in retail sales volumes eased back to 0.5% in August from 0.6% in July.

Archer pointed out that the trend is slowing and shops will struggle to grow by more than 0.5% quarter-on-quarter in the third quarter.

"This compares with retail sales surging 1.5% quarter-on-quarter in the second quarter," he said.

From 1 September, companies in the EU were banned from making or importing vacuum cleaners above 1600 watts, prompting a flurry of buying across the continent.

According to one recent study, five of the top seven cleaners had motors of more than 1600 watts.