British consumers, whose spending has helped the economy through the Brexit crisis, cut back on their shopping in October, according to official data that adds to signs the economy is losing momentum. An unexpected fall in sales in October pushed retail growth over the last three months to its weakest since April 2018, the Office for National Statistics (ONS) said.

The downbeat news follows official figures earlier last week that showed the economy as a whole grew at its weakest annual rate since 2010 in the third quarter of this year, while the number of people in work dropped sharply.

A strong job market and solid consumer spending have helped keep Britain’s economy afloat since the Brexit referendum in June 2016, as businesses have cut investment and manufacturers have suffered more recently from the US-China trade conflict.

“These latest ONS figures are symptomatic of the challenges facing the retail sector after a year fraught with uncertainty,” said Lynda Petherick, head of retail at management consultants Accenture. Prime Minister Boris Johnson has called an early election for Dec.12 in an attempt to get a large enough majority to pass Brexit legislation before a new deadline of Jan.31, something he hopes will restore business confidence.  However, many economists fear that even if he gets his way, the risk of serious disruption to Britain’s trade ties with the European Union will soon be back on the agenda, due to his aim of moving to new trading arrangements by the end of 2020. The Bank of England warned last week it may need to cut interest rates if global trade conflicts and Brexit uncertainty do not end, and two of its policymakers have already voted to loosen policy.

The data showed retail sales volumes unexpectedly fell by 0.1%, and annual sales growth held at 3.1%, bucking average forecasts for a pick-up to 3.7%. In the three months to October sales rose just 0.2% compared with the previous three months, an 18-month low. Measures that exclude spending on motor fuel - which some economists think give a truer picture of underlying consumer demand - were weaker still, and fell below all forecasts in Reuters’ poll of economists.

The only retailers to do well in October were department stores, which the ONS said benefited from sales promotions and an earlier introduction of Christmas lines. Supermarket group Sainsbury’s said last week that it expected to trade well in the run-up to Christmas but feared a consumer hangover in early 2020 if Brexit was unresolved.

Baby products retailer Mothercare is set to close its British stores with the loss of at least 2,500 jobs under the weight of the pressures plaguing the retail sector, including online competition.

British inflation fell to its lowest level in nearly three years in October, official data showed on Wednesday, adding to expectations that the Bank of England’s next move might be an interest rate cut. Consumer prices rose at an annual rate of 1.5%, lower than September’s 1.7%, as a power regulator’s tariff cap pushed down electricity and gas prices for 15 million homes.

It was the lowest consumer price index reading since November 2016, the Office for National Statistics said, giving households, whose spending has helped the economy through the Brexit crisis, a bit of a boost before next month’s election. A Reuters poll of economists had pointed to a 1.6% increase. British government bond prices jumped, with the yield on 10-year gilts falling by more four basis points on the day.

“Inflation dipping more than expected to 1.5% in October will likely fan expectations that the Bank of England will cut interest rates before too long if the economy fails to pick up from its current struggles,” said Howard Archer, an economist with forecaster EY Item Club. Two BoE policymakers voted to cut rates last week, citing signs of a cooling in the labour market, and their colleagues sounded cautious about the slower global economy and Brexit risks.

“Overall, the figures do little to change our view that inflation will spend more time below 2% than above it in 2020 and that if Brexit is delayed further, interest rates will be cut, in May 2020,” Ruth Gregory, an economist at Capital Economics, said after the ONS data.

The BoE expects inflation to slow to 1.25% early next year due to energy and water price caps. Gas and electricity prices fell by 8.7% and 2.2% respectively in October from September, which was only partially offset by rising clothing prices.

 Falling motor fuel prices also helped push down inflation. A measure of inflation that excludes energy, fuel, alcohol and tobacco was unchanged at 1.7%. Other ONS figures suggested no short-term inflation pressure.

Reuters