Retail sales slide as cost of living crisis and wet weather hit British shops – business live | Business
Today’s retail sales slide comes just two days after we learned that inflation slowed during October, from 6.7% to 4.6%.
Despite much trumpeting about the government hitting its inflation pledge, it’s clear that households are still feeling the squeeze from higher prices.
Aled Patchett, head of retail and consumer goods at Lloyds Bank, says:
“The rising cost of living remains a drag on consumers’ discretionary incomes. Households continue to prioritise essential spending, particularly as falling winter temperatures push energy use up and high levels of inflation prevent material downturns in the prices of goods.
“Retailers will now be looking to strike the balance of getting staffing levels right while also being mindful that an early sales offering might not get the tills ringing as loudly as they’d like, as consumers navigate financial challenges elsewhere. Those that get it right could be toasting a successful end to what has been a challenging year.”
Phil Monkhouse, head of sales at global financial services firm Ebury, blames higher interest rates for the retail sales tumble in October, saying:
“The Bank of England’s attempts to whittle down inflation back to its target of 2% is perhaps finally feeding through into consumers’ pockets with this month’s data reinforcing September’s cliff-face drop [a 1.1% fall].”
Shoppers are turning a blind eye to Christmas festivities, he suspects, as they prioritise winter heating costs and mortgage repayments.
Today’s retail sales report also shows the painful impact of inflation over the last few years.
When compared with their pre-Covid-19 pandemic level in February 2020, total retail sales were 16.9% higher in value terms, but volumes were 3.1% lower.
In other worse, people have spent almost 17% more in October than in the last month before the first lockdown, but took home over 3% fewer items.
October was “another poor month” for household goods stores and clothing retailers.
So explains Heather Bovill, deputy director for surveys and economic indicators at the Office for National Statistics.
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Retail sales across Great Britain have dropped as consumers are hit by high borrowing costs and inflation, while bad weather drove shoppers away.
New data from the Office for National Statistics shows retail sales volumes fell by 0.3% in October, missing forecasts for a 0.3% rise – a warning sign for the UK economy.
That follows a revised 1.1% decline in September – worse than the 0.9% drop first estimated.
Retail sales volumes in October were at their lowest level since February 2021, during the Covid-19 pandemic, when there were “widespread and extensive restrictions to non-essential retail in England, Scotland and Wales”, the ONS reminds us.
On an annual basis, retail sales volumes slumped by 2.7% compared with October 2022. However, consumers had to spend 2.2% more than a year ago, to get less stuff, due to higher prices on the shelves.
The ONS reports that food stores sales volumes fell by 0.3% in October.
Non-food stores sales volumes fell by 0.2% in October 2023, with retailers suggesting that “cost of living, reduced footfall and the wet weather in the second half of the month contributed to the fall”.
Storm Babet brought heavy rain and strong winds to the UK in October, followed by Ciarán at the end of the month.
Online retailers saw a 0.8% rise in sales volumes (after a fall of 2.4% in September), suggesting shoppers turn to the internet rather than braving the blusterly outdoors.
This slowdown in demand highlights how high interest rates are hitting the economy, and could fuel concerns that the UK is teetering close to recession.
Yesterday, BoE policymaker Megan Greene said it was too early to think about rate cuts, and that borrowing costs will need to remain higher for longer to control inflation.
Also coming up today
The clock is ticking towards next week’s autumn statement, and we’re already getting hints about what Jeremy Hunt will announce.
The chancellor will target the decline in workforce participation, by depriving benefits from welfare claimants who “refuse” to engage with their jobcentre or take work offered to them.
Hunt’s alsoconsidering plans to halve the rate of inheritance tax.
Hunt may have some leeway for giveaways, due to improved public finances, and as the freeze in income tax thresholds drags more people into higher tax bands.
In the financial markets, investors are watching the oil price after it hit a four-month low last night.
Brent crude dropped $3.76, or 4.6%, to $77.42 a barrel, amid worries about global oil demand following weak economic data – including rising jobless claims and falling retail sales in the US.
7am GMT: UK retail sales for October
8.30am GMT: European Central Bank president Christine Lagarde gives keynote speech at 33rd Frankfurt European Banking Congress
10am GMT: Eurozone inflation report (final estimate) for October
1.10pm GMT: Bank of England deputy governor )Dave Ramsden gives keynote speech at the Society of Professional Economists Annual Conference
1.30pm GMT: US housing starts and building permits data for October