U.K. Retail Sales Fall Unexpectedly in Longest Ever Weak Patch
U.K retail sales fell unexpectedly for a fifth month as consumer confidence plunged, adding to evidence that the economic recovery is losing momentum.
The volume of goods sold in stores and online fell 0.2% last month, the Office for National Statistics said on Friday. Economists had expected an increase of 0.6%. It’s the longest period of consecutive monthly declines on record and came despite panic buying for fuel during a supply crisis.
The figures both shed light on the weakness of spending and indicate a big shift in consumption patterns. While overall volumes remain above pre-pandemic levels, sales dropped for both clothing and department stores. Food and fuel sales increased, and there was a monthly gain for clothing stores.
“Despite the lifting of restrictions, in-store retail sales remain subdued, with many consumers still opting to shop online,” said Darren Morgan, director of economic statistics at the ONS.
Bank of England policy makers are concerned that supply shortages and consumers splashing out after the end of lockdown are fanning inflationary pressure. Financial markets anticipate the central bank will lift interest rates next month, though BOE Chief Economist Huw Pill told the Financial Times last night that the decision was “finely balanced.”
While the bank is shifting its focus toward inflation, consumers are feeling the effect of higher prices, rising taxes and a shortage of goods in stores. Those issues are straining household finances and prompted a sharp drop in confidence about the outlook for the economy.
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“Another unexpected drop in U.K. retail sales in September adds to downside risks to economic growth data for the third quarter. The looming squeeze in living standards from soaring inflation is also damaging prospects for the final quarter of the year.”
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“Retailers will be concerned by the slump in sales, just as they begin their preparations for the all-important Christmas period,” said Helen Dickinson, chief executive officer of the British Retail Consortium. “Fuel shortages, wet weather, and low consumer confidence all contributed to lower consumer demand this month, with household goods, furniture and books all hit particularly hard.”
The drop last month is all the more surprising because of panic buying of fuel during a supply crisis. The ONS said fuel sales rose 2.9% in the month and leaped over their pre-pandemic level. That boosted sales at some filling stations, but depressed them at others that lacked supplies.
Consumer confidence dropped sharply in October, a separate survey by the market research firm GfK showed earlier Friday.
“The sharpest concern is how consumers see the future economy,”’ said Joe Staton, client strategy director at GfK. “Against a backdrop of cheerless news -- food and fuel shortages, surging inflation, squeezing household budgets, the likelihood of rate rises and climbing Covid rates -- it’s not surprising that consumers are feeling down.”
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