U.K. retail sales experienced a steeper decline than anticipated in September, reflecting a growing concern over consumer spending. According to data from the Office for National Statistics (ONS), volumes fell by 0.9% during the month, surpassing economists’ expectations of a 0.4% drop. The ONS attributed this decline to the persisting pressure of rising living costs. Additionally, unseasonably warm weather during September also played a role in dragging sales down, as consumers postponed purchases of autumn jackets and coats.
The Met Office, responsible for monitoring British weather, revealed that September of this year was recorded as the joint-warmest on record due to an unexpected heat wave during the first half of the month. While food-store and fuel sales experienced slight growth in September, it was not sufficient to offset the declines witnessed in other stores and online. Notably, sales of watches and jewelry were significantly lower, indicating consumer reluctance to spend on discretionary items given the current economic climate.
The slump in sales comes amidst an increasingly bleak landscape for consumer spending, as U.K. consumer confidence dwindled to minus 30 in October, as indicated by an index compiled by GfK, a consumer-research firm. Factors contributing to the financial pressures faced by consumers include heating and fuel costs, mortgage rates, and a slowing job market. Furthermore, new geopolitical challenges emerging in the Middle East pose additional headwinds.
According to Alex Kerr, economist at Capital Economics, the retail sector may have fallen back into recession during the third quarter. High interest rates continue to weigh on spending, with volumes likely to continue falling in the upcoming quarters. On a positive note, price rises remained stable in September. Services inflation resulted in a year-on-year headline rate of 6.7%, as reported by the ONS earlier this week. Economists anticipate that inflation will ease in the following months, potentially providing some relief to consumers ahead of the crucial holiday shopping season.
