UK Nov. retail sales rise ahead of VAT hike

British retail sales rose in November for a second consecutive month as consumer spending picked up ahead of a hike in value added tax (VAT) next year.

Retail sales rose 0.3 percent in November following an upwardly revised 0.7 percent increase in October, the Office for National Statistics said on Thursday.

“November’s UK retail sales figures provide further evidence that consumer spending is ending the year on a relatively strong note. Admittedly, at least part of this strength probably reflects consumers bringing forward big-ticket spending ahead of the VAT rise,” said Vicky Redwood, an economist with Capital Economics.

While sales at food stores increased by 0.6 percent in November, non-food stores saw a 0.2 percent rise in sales. In the non-food category, sales of computers and telecom equipment rose 2 percent.

Household goods saw the largest decrease in sales in November, down 1.1 percent.

However, the volume of retail sales in November were 1.1 percent higher compared with the same month last year. Year-on-year, sales at food stores decreased 1.3 percent, posting a decline for the fifth straight month.

On Wednesday UK reported an unemployment rate of 7.9 percent in the three months to October as the number of people unemployed crossed the 2.5 million mark.

“And yesterday’s labour market figures tentatively pointed to tougher times ahead. But for now, at least, consumer spending should prevent the overall economic recovery from slowing too sharply in the final quarter of the year,” said Redwood.

Inflation has been a concern in the U.K. for the past several months. The CPI was 3.2 percent in October, remaining above the 2 percent target for the eighth month in a row.

Further, the Bank of England (BoE) said inflation is likely to stay above the target for 2011, given the forthcoming rise in VAT to 20 percent from the current 17.5 percent and continuing increases in import prices.

“Elsewhere, the quarterly BoE inflation attitudes survey showed households’ inflation expectations for the next year jumping from 3.4 percent to 3.9 percent. But with longer-term expectations rising more modestly from 2.9 percent to 3.2 percent, we doubt that this will panic the MPC into a near-term policy tightening,” Redwood added.