By Andy Bruce
LONDON (Reuters) – British retail sales fell much more than expected in August, in another sign that the economy is sliding into recession as the cost of living crisis weighs on household disposable spending.
The Office for National Statistics said retail sales volumes fell 1.6% month-on-month in August, the biggest drop since December 2021 and worse than all expectations in a Reuters poll of economists that indicated a 0.5% drop.
The data is likely to add to concerns about the strength of demand in the British economy. UK fashion retailers Primark, ASOS (LON 🙂 and supermarket Ocado (LON 🙂 Retail have warned of their earnings this month.
The Pound slipped further towards $1.14 on the back of the data.
“With a difficult winter approaching, it will be a concern for retailers that shoppers have already curbed their spending despite the hot summer,” said Linda Petherick, lead retailer at Accenture (NYSE:NYSE).
The Office for National Statistics said all major retail sectors – food stores, non-food stores, non-commercial retail and fuel – declined over the month for the first time since July 2021, when COVID-19 restrictions on hospitality were lifted.
The period of mourning following the death of Queen Elizabeth poses another challenge for retailers, as businesses are set to be widely closed on Monday for the Queen’s funeral.
“The gloomy weather in the UK this week and news of slowing economic growth will add to the sense of anxiety among retailers as the weather cools,” Pethrick said.
Although inflation fell below 10% last month, households are still struggling with the biggest price increases since the early 1980s, mostly due to higher energy prices in the wake of the Russian invasion of Ukraine.
The Office for National Statistics said people cut back on their furniture purchases last month.
“Feedback from retailers suggests that consumers are cutting back on spending due to price increases and affordability concerns,” she said.