Retail Sales in the UK Fall Amidst Cost of Living Squeeze and Bad Weather
Retail sales in Great Britain have taken a hit as consumers face high borrowing costs and inflation, while bad weather has also impacted shopper turnout. According to new data from the Office for National Statistics (ONS), retail sales volumes dropped by 0.3% in October, failing to meet the forecasted 0.3% rise. This decline is seen as a warning sign for the UK economy.
September’s retail sales figures were also revised, revealing a 1.1% decline, worse than the initially estimated 0.9% drop. In fact, October’s retail sales volumes were at their lowest level since February 2021 when the Covid-19 pandemic prompted widespread restrictions on non-essential retail in England, Scotland, and Wales.
On an annual basis, retail sales volumes plummeted by 2.7% compared to October last year. However, consumers had to spend 2.2% more this year to purchase fewer items due to higher prices on the shelves.
The ONS reports that food store sales volumes experienced a 0.3% decline in October. Meanwhile, non-food store sales volumes fell by 0.2%, with retailers citing the cost of living, reduced footfall, and the wet weather in the latter half of the month as contributing factors to the decline.
Storm Babet brought heavy rain and strong winds to the UK in October, followed by Ciarán at the end of the month. These weather conditions likely deterred shoppers from venturing out, leading some to turn to online retailers. Online sales volumes saw a 0.8% increase, indicating a preference among consumers to shop from the comforts of their own homes rather than face the blustery outdoors.
This drop in demand highlights how high interest rates are affecting the economy and raises concerns that the UK may be on the brink of a recession. Bank of England (BoE) policymaker Megan Greene recently stated that it is too early to consider rate cuts and that borrowing costs will need to remain higher for a longer period to control inflation.
As the clock ticks towards next week’s autumn statement, there are already hints about what Chancellor Jeremy Hunt may announce. He is expected to address the decline in workforce participation by implementing measures that would withdraw benefits from welfare claimants who refuse to engage with their job centers or decline work offers. Hunt is also reportedly considering plans to cut the rate of inheritance tax in half.
Improved public finances may provide Hunt with some flexibility for potential giveaways, especially as the freeze in income tax thresholds pushes more individuals into higher tax brackets.
In the financial markets, investors are closely monitoring the oil price after it hit a four-month low. Brent crude experienced a drop of $3.76, or 4.6%, falling to $77.42 a barrel. Concerns about global oil demand were fueled by weak economic data, including rising jobless claims and falling retail sales in the United States.
Overall, the recent downturn in retail sales, coupled with the impact of adverse weather conditions, signals potential challenges for the UK economy. As policymakers grapple with the need to control inflation and stimulate growth, the public eagerly awaits the announcements in next week’s autumn statement.
More detail via The Guardian here… ( Image via The Guardian )