UK retail sales fell by far more than expected in September as consumers cut back on all categories of spending, with food sales hit particularly hard.
Latest data from the Office for National Statistics (ONS) paint a bleak picture as volumes fell by 1.4 per cent from August, almost three times the 0.5% decline expected by analysts. It marks the first time that retail sales have fallen below pre-pandemic levels.
Compared to a year earlier, total sales volumes have declined by 6.2%. In value terms, cash in the tills rose by 3.3%, but all of that was accounted for by surging inflation which has returned to a 40-year high of 10.1%.
Although there was one less trading day than usual in September because of the Queen’s funeral, analysts said it is clear that consumers are significantly reining in spending in response to the worsening cost-of-living crisis. This was reflected in the 1.8% monthly decline in food store sales, the biggest contributor to the overall fall in volumes.
“Even in spite of the additional bank holidays, there is no question that the momentum is downward as retailers enter the critical ‘Golden Quarter’ period in the run-up to Christmas,” said Lisa Hooker, consumer markets leader at PwC.
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“Political and economic uncertainty, combined with increasing utility bills and the threat of higher mortgage interest rates, will put a severe dampener on consumer spending in coming months.”
Sales of household goods such as furniture fell by 1.5% in September while other non-food retailers such as jewellery stores reported a 0.7% decline in volumes. Department stores recorded a fall of 0.6%.
Consumers are also cutting back on driving in a bid to save money, with automotive fuel volumes 1.3% lower despite a decline in prices at the pump.
Online shopping fell by 3% as more people returned to shopping in physical stores. However this was still 18% above pre-pandemic levels, accounting for 26.4% of total retail sales volumes.
Thomas Pugh, economist at RSM UK, said the deterioration looks set to continue as inflation “hammers retail spending and the wider economy”.
“Overall, we think the economy is already in recession and will be until [the third quarter of next year] with a peak-to-trough drop in GDP of around 2%, similar to the 1990s recession,” he added.
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