UK retail sales weaker than expected amid cost of living crisis

UK retail sales rebounded more weakly than expected in October, underscoring the cost of living crisis which is eroding consumer purchasing power.

Excluding fuel sales, the volume of goods sold in stores and online rose 0.3 percent after a 1.5 percent drop in September, when shops were closed for the funeral of Queen Elizabeth II, the Office for National Statistics said on friday with Economists had forecast a gain of 0.6 percent.

Sales including auto fuel rose 0.6 percent after falling 1.5 percent the month before. That was close to economists’ forecast for a 0.5 percent increase.

However, the recovery could prove short-lived. With double-digit inflation and rising taxes and interest rates, living standards are on track for the biggest decline on record, the government’s tax watchdog said on Thursday.

“Overall, retail sales are continuing their downward trend observed since summer 2021 and are below pre-pandemic levels,” said Darren Morgan, director of economic statistics at the ONS.

Fuel sales rose 3.3 percent but elsewhere the picture was mixed with groceries, household goods and department store sales all down. This was offset by higher apparel sales as stores introduced new clothing lines. Online sales and second-hand goods, particularly at auction houses, also increased.

Total sales in October were 6.1 percent lower than a year ago and down 2.4 percent on a three-month basis. Rising prices caused consumers to spend more to buy the same basket. The value of retail sales rose 1.8% in October, three times the increase in volume.

In a gloomy assessment of the economic outlook, the Office for Fiscal Responsibility warned on Thursday the economy is already in a recession that will last more than a year and push unemployment higher.

The figures coincide with figures showing that UK consumer confidence rose for a second month after Prime Minister Rishi Sunak worked to stabilize the economy following the disastrous and short tenure of his predecessor Liz Truss.

The market research company GfK Ltd. said his sentiment gauge rose three points to minus 44 in November, close to a record low of minus 49 recorded in September, when Truss’ plan to cut taxes sparked panic in financial markets.

“This month’s rebound is likely to reflect nothing more than a collective sigh of relief as a new prime minister takes charge after the alarming fiscal escapades we saw in September,” said Joe Staton, client strategy director at GfK. “External factors have changed little. More bad news is inevitable.”

Confidence is well below where it was a year ago, reflecting increases in food and energy prices that are depressing living standards and pushing the economy into recession. GfK said consumers continue to come under pressure from rising interest rates, taxes and rent payments.

The GfK report is a ray of hope for retailers and hospitality companies looking for a spending boost around the Christmas and New Year holidays.

“Retail and leisure companies are hoping for a feel-good factor that will spur spending, at least temporarily, despite some consumers’ increasing difficulty or reluctance to buy,” said Linda Ellett, UK head of consumer markets, retail and leisure at consultant KPMG UK UK retail sales weaker than expected amid cost of living crisis

Fry Electronics Team

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