Roundup: British shoppers shrug off Brexit effect

The largest rise for 14 years in Britain's retail sales figures released on Thursday shows that British shoppers are unaffected by any kind of Brexit effect, and are happy to keep on spending on the high street.

Economic forecasts before the Brexit vote on June 23 warned of a slowdown in GDP growth and in wage growth if Britain voted to leave the European Union (EU). So far, this has not materialized, with economists arguing it is too early to feel the full effect of the vote.

These retails sales figures -- up 7.4 percent year on year for October -- follow in that pattern, and confounded consensus expectations of 0.4 percent growth. The monthly growth was impressive, up 1.9 percent on the lacklustre September figures.

Britain's Office for National Statistics (ONS) which released the figures said colder weather helped clothes sales, and the festivities around Halloween on October 31 may have boosted sales too.

But the longer term economic outlook remains dominated by the uncertainty around, and negative likely impact of, the Brexit vote.

Sterling has fallen 18 percent against the U.S. dollar compared to a year ago to 1.25 U.S. dollars, much of that after the Brexit vote. The effects of that fall, positive and negative, have yet to be passed through to the economy.

The negative effects are likely to be felt in higher consumer prices, as producers pass on the consequences of a weaker pound buying less produce, and in higher inflation which will in turn erode the spending power of consumers.

"A likely softening labor market and consumer uncertainties will dilute workers' ability and willingness to push for higher pay awards despite rising inflation," said Dr Howard Archer, British economist with IHS Global Insight in London.

"Companies look highly likely to clamp down on workers' pay as they strive to save costs in a more difficult environment, and as their input prices are lifted by the sharply weakened pound," said Archer.

Archer also warned that the strong labor market -- which added 49,000 jobs in September according to statistics released on Wednesday -- may be starting to crack. The September rise was the lowest for six months.

But for the present, consumers and their wallets are still benefiting from decent fundamentals, particularly nominal wages.

Earnings growth of 2.3 percent in the three months to September was 1.3 percentage points above inflation over the same period. The year-on-year growth in wages for September was even higher, at 2.5 percent. Inflation also, surprisingly, fell back to 0.9 percent per annum for October in figures released earlier this week.

Christmas is the busiest sales period in Britain and it is rapidly approaching.

"Retailers will clearly be hoping that consumers' willingness to spend remains high over the vital Christmas shopping period, said Paul Hollingsworth, British economist at economic think-tank Capital Economics.

While spending from consumers, the current main driver of economic growth, is likely to hold up there is uncertainty.

"We doubt that high-street spending will be able to maintain this pace for much longer, with the squeeze in real income growth yet to come," said Hollingsworth.

He added: "Nonetheless, with interest rates remaining low, and the Chancellor of the Exchequer Philip Hammond set to ease the planned fiscal squeeze considerably at next week's Autumn Statement (November 23), we don't think that spending growth is on the cusp of a dramatic slowdown."

Early Christmas discounts from major retailers in the final two weeks of November are likely to increase rather than decrease overall spending, and retailers and the economy have every expectation of strong November figures. Enditem