LONDON, Oct. 17 (Xinhua) -- A growth in retail sales in September revealed in figures on Thursday, showed that the recovery in the British economy is continuing, said economists.
The September figures showed a rise of 0.6 percent in retail sales, against a consensus expectation of 0.4 percent, and a turnaround from August's drop of 0.8 percent.
The boost to retail sales comes despite a tight squeeze on wages. Inflation figures yesterday, Wednesday, showed Consumer Price Inflation at 2.7 percent, against a central bank target of 2 percent, with wages growth trailing at 0.7 percent.
"The recent increase in consumption comes at the same time as a strengthening in consumer confidence, and both support the view of a sustained improvement in the retail sector," said Blerina Uruci, economist with Barclays Economics Research.
She said she continued to expect household demand to grow steadily this year, although an acceleration in the pace of consumer spending growth to the same extent as retail sales was not expected.
"We think that households continue to face a significant squeeze in real term earnings growth and other headwinds, including credit constraints and the need to repair their balance sheets. The improvement in the housing market could, however, pose some upside risks to this view as an increase in house prices and the subsequent rise in household's perceived wealth could boost consumption further."
"With employment rising and house prices continuing to push higher it is likely that consumer confidence will continue to strengthen. This should be supportive of ongoing improving retail sales numbers. The main concern in the near-term is higher utility bills, which could squeeze household finances,"said James Knightley, chief British economist with ING.
Dr Howard Archer, chief British and EU economist with IHS Global Insight, said that there was likely to be some relief in the future for consumers feeling the pinch in their wallets from below-inflation pay rises.
"Earnings growth seems likely to pick up, but the increase may well be gradual as companies remain keen to contain their costs in a still competitive environment while still appreciable labour market slack limits workers' ability to push for large pay increases,"he said.