UK retail figures set to reveal impact of riots

The impact of the riots on the retail sector will be laid bare today as official figures are forecast to reveal a drop in sales volumes in August.

Economists expect the Office for National Statistics (ONS) to reveal a 0.2% drop in retail sales volumes last month, compared with a 0.2% increase in July.

The figures cover the period of widespread violence and looting in early August, which saw the likes of Currys and JD Sports attacked, forcing businesses to shut their stores and send staff home early.

The shocking scenes added to the wider malaise swamping the whole sector, which has been knocked sideways by a consumer spending squeeze, driven by high prices and low wages.

The retail sector has had a torrid year with department store TJ Hughes, fashion specialist Jane Norman and interior designer Habitat falling into administration, while Mothercare, entertainment group HMV and chocolatier Thorntons have all announced store closures.

Philip Shaw, economist at brokers Investec, has forecast an above-consensus decline of 1.1%.

He said: "In terms of the big picture, we would argue that relatively little has changed over the past month, but several indications point to the data showing a fairly hefty decline over August."

Clothing, furniture and electrical goods stores all suffered in August, according to a report released by the British Retail Consortium (BRC), as overall retail sales dropped 0.6%.

Food sales growth was similar to the level seen in July but the BRC said non-food sales fell further below their year ago level, with footwear and homewares showing the largest declines despite further promotions.

Elsewhere, accountancy firm BDO's High Street Sales Tracker said the riots took a heavy toll on the retail sector in August, deterring consumers from parting with their hard-earned cash.

Howard Archer, chief UK and European economist at IHS Global Insight, said weak retail figures would point towards poor economic growth in the third quarter as consumer spending accounts for some 65% of GDP.

He said: "Consumer confidence is very low, with purchasing power under severe pressure from high inflation, muted wage growth and tighter fiscal policy."