UK retail sales volumes rose by 0.6 per cent month-on-month (2.5 per cent year-on-year) according to the latest data out today from the Office for National Statistics (ONS).

Consensus expectations were for a gain of 0.4% (2.1%).

Furthermore, the previous month's drop was revised up to show a decline of 0.1% versus July, instead of the -0.2% which the preliminary estimate had revealed.

Similarly, retail sales excluding automotive fuel increased at a clip of 0.6% (2.9%), when a considerably smaller rise of 0.4% (2.4%) was forecast.

Looking at the monthly picture the prices of goods sold in the retail sector were estimated to have increased by 1.3%. Annual store price inflation was estimated to have increased to 0.7%. Consistent with the Consumer Prices Index the main source of upward pressure came from a rise in prices at stores selling textiles, clothing and footwear, the ONS explains.

The proportion of Internet sales was estimated to have increased by 0.5% between August and September 2012. Compared with a year ago, the proportion of Internet sales in September 2012 was estimated to have increased by 0.5%. In September 2012 the estimated average weekly spend on line was £507.8m.

This was Nomura's first-take on the data: "Most growth and upside relative to our forecast was found in clothing (+2.0% month-on-month) and household goods (+1.1% month-on-month). Retail's post-Olympics resilience is encouraging, especially in durables. The only thing that has really changed in 2012 to explain this improvement is the alleviation of inflation pressure on the high street.

"Value growth has been remarkably stable since the Great Recession, only it was previously all being funnelled into paying higher prices. Consumers were essentially running just to stand still. (...) The income and confidence that comes with having a job (employment is now at its highest ever level) is a wonderful motivator."

Analysts at Barclays Research seem to be of much the same opinion, saying that: "Although not all headwinds facing the sector have disappeared, with consumer confidence and household income growth likely to remain well below historical levels, we expect the sector to stabilise in the coming months. More generally, we expect private consumption to be broadly flat for the second half of this year before it starts a measured recovery from the beginning of next year."

AB

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