British consumers defy forecasts and up their shopping again

By William Schomberg

LONDON, Sept 18 (Reuters) - British consumers unexpectedly increased their shopping in August, although they cut fuel purchases after prices jumped following the resumption of the Iran war, official figures showed on Friday.

Retail sales volumes rose 0.5% from July, defying economists' forecasts in a Reuters poll for a 0.2% decline and adding to signs of resilience in Britain's economy despite uncertainty linked to the Gulf conflict.

The increase reversed a 0.5% fall in July. Sales volumes had also risen in the previous two months, helped by sunny weather and the start of the men's soccer World Cup in June.

Paul Dales, chief UK economist at Capital Economics, said Britain's economy looked on track for solid growth of about 0.4% in the third quarter, or possibly more after Friday's figures.

"That all said, with the peak in inflation yet to come, the biggest drag on households' real incomes has yet to come," Dales said. "That's why we expect real GDP growth to slow in Q4 and Q1."

Prime Minister Andy Burnham has offered some cost-of-living help to households but he and finance minister John Healey have little room for more giveaways in the new government's first budget on October 28.

August's increase was driven by online shopping and department store sales, with clothes and food sales also up, Office for National Statistics data showed.

Fuel sales volumes fell 1.3% from July, although in value terms the money spent on fuel rose 4.3%.

The Office for National Statistics said retailers reported signs of a change in motorists' behaviour in response to high fuel prices, including only partially filling their tanks.

Compared with August last year, overall sales volumes were up by 2.4%.

Sterling was little changed against the dollar after the data was published.

Recent updates from major British retailers have been subdued.

Discount fashion retailer Primark reported flat underlying UK sales growth for its fourth quarter, while the John Lewis Partnership reported wider first-half losses.

Clothing retailer Next cut its forecast for sales growth in the coming months, highlighting concerns over the economy, while industry data has shown flat food sales in August.

Sandra Prince, head of consumer at Lloyds, said many households were still carefully balancing their budgets and prioritising where their money goes.

"It remains to be seen how potential changes in inflation conditions may influence spending patterns over the coming months," Prince said.

(Reporting by William Schomberg. Additional reporting by James Davey. Editing by William James and Mark Potter)