British retailers report sales climb in September

Retail sales in Britain climbed in September, a sign shoppers weren’t deterred by higher credit costs, the British Retail Consortium said Monday.

Revenue at outlets open at least a year rose 3% from the same month in 2006 after increasing 1.8% in August, according to the consortium, which represents 80% of Britain’s retailers. The consortium’s survey was conducted Aug. 26-Sept. 29.

Total purchases in September were up an annual 4.9%.

Britons have withstood five increases in the benchmark interest rate, rising borrowing costs caused by contagion from the U.S. sub-prime mortgage collapse and the first run on a British bank in more than a century.

Spending this year by consumers, who have record debt of $2.9 trillion, is helping power the fastest economic growth since 2004.

“For the moment, at least, consumer spending patterns are not being affected by the wider credit crunch issues,” said Helen Dickinson, head of retail at KPMG, in a statement. “The real acid test will come in the lead-up to Christmas.”

Shoppers bought warmer clothing and footwear, as cold and wet weather last month boosted demand for winter garments, the consortium said. Philip Green, the billionaire owner of British department-store chain Bhs Group Ltd., said last week that sales revived in the previous six weeks after temperatures cooled.

Consumer spending, which accounts for two-thirds of gross domestic product, expanded 0.8% in the second quarter, after rising 0.7% in the previous three months. The economy will grow 2.9% in 2007, the most in three years, the International Monetary Fund predicted July 25.

The retail group’s report suggested that shopping wasn’t affected by a run on Northern Rock, a British mortgage lender, which said Sept. 14 that it had sought a rescue from the Bank of England after funding difficulties stemming from rising defaults on U.S. mortgages aimed at people with a poor credit history. Only a government guarantee on deposits ended the panic.

Banks such as Abbey, the second-largest British mortgage lender, are raising credit costs, squeezing consumer finances. The average rate on a mortgage fixed for two years, the most popular type, rose to a seven-year high of 6.58% in August for borrowers who made a 5% down payment, the Bank of England reported Sept. 11. The central bank raised its benchmark rate to a six-year high of 5.75% in July.