Consumers in the UK are holding back on non-essential spending as rising fuel prices and the high cost of living take their toll, according to data published by the British Retail Consortium (BRC). Sales at chain stores grew by 2.7% in September, compared to a 4.1% increase in August. BRC Chief Executive Helen Dickinson attributed the slowdown to the recent increase in petrol and diesel prices, as well as rising housing costs. Expensive items such as furniture and electricals performed poorly, while warm weather last month affected sales of autumnal clothing.
Although the UK’s high inflation rate has eased slightly, standing at 6.7% in August, it remains more than three times the Bank of England’s 2% target. The BoE recently paused its run of consecutive interest rate hikes but has cautioned against declaring victory too soon. The BRC’s like-for-like sales measure, which adjusts for changes in store space, showed growth of 2.8% in September, compared to 4.3% in August. These figures do not account for inflation and are likely to represent a decrease in sales volumes.
Data from Barclays also revealed that the annual growth rate in money spent on credit and debit cards increased to 4.2% in September, up from August’s 2.8% rise. However, this acceleration was largely driven by higher spending on fuel. While food sales saw an increase, spending on restaurants and takeaways declined as households prioritized saving for the upcoming Christmas season. On the other hand, spending in bars grew, with the Rugby World Cup providing a boost.
A survey conducted by Barclays found that 70% of consumers were seeking ways to reduce costs, slightly higher than August’s figures. Jack Meaning, Chief UK Economist at Barclays, highlighted that consumers’ caution was influencing their spending decisions. He stated, “This suggests the outlook for consumers, and the businesses that rely on them, is weak, even as they finally see their disposable incomes rise faster than inflation. It makes it hard to see anything but a relatively stagnant economy on the horizon.”
The combination of rising fuel prices, high inflation, and cautious consumer behavior is impacting the UK retail sector. As consumers tighten their belts and prioritize essential spending, retailers are likely to face challenges in boosting sales. The ongoing uncertainty surrounding Brexit also continues to contribute to the uncertain economic landscape.
More detail via Reuters here… ( Image via Reuters )