UK retail sales surprised positively again in August, as had been suggested by data on notes and coin in circulation – see previous post. Weekly numbers on the note issue have strengthened further so far in September, hinting that high-street spending has remained firm.

Retail sales volume declined by only 0.2% in August after an upwardly-revised 1.9% gain in July. Annual growth was stable at 6.2%. Continued strength had been suggested by buoyant annual growth of real (i.e. consumer price inflation-adjusted) notes and coin – see first chart.

Currency in circulation appears to have accelerated further in early September. Annual growth of the note issue averaged 9.7% in the first two weeks, up from 8.8% in August – second chart.

Retail sales volume feeds into the output measure of GDP with a 5.6% weight. If September sales were to equal the July / August average, the third-quarter rise would be 1.5%, implying a 0.1 percentage point contribution to GDP growth. As noted in yesterday’s post, vacancies numbers are consistent with quarterly GDP expansion of 0.4%. The Bank of England has revised its third-quarter growth forecast from 0.1% to 0.3% and may be forced to upgrade further.