UK retail sales after surprise fall as rate rises take hold – NehalBlog

Retail gross sales within the UK fell unexpectedly in October, reinforcing the impression {that a} sequence of rate of interest rises supposed to curb inflation is beginning to cripple financial exercise.

The amount of products bought in shops and on-line fell by 0.3 %, the Workplace for Nationwide Statistics mentioned on Friday. That follows a downwardly revised 1.1% decline in September, when unseasonably heat climate dampened spending on clothes.

Economists had anticipated a 0.4 % rise for October. As a substitute, gross sales fell to their lowest degree since February 2021, when Covid restrictions have been in power, with retailers citing the price of dwelling disaster and unhealthy climate to justify their poor efficiency. This doesn’t bode effectively for the “golden quarter”, the interval earlier than Christmas, when shops could make nearly all of their annual income.

“Shoppers held the purse strings in October,” mentioned Samantha Phillips, companion at McKinsey & Co. “Regardless of the continued decline in CPI inflation, it is a disappointing begin to the golden quarter which will replicate usually low ranges of shopper confidence. It is usually doubtlessly an indication that consumers are ready for Black Friday bargains and different festive promotions.

The figures are the most recent indication that the UK economic system is beginning to really feel the results of the Financial institution of England’s 14 consecutive charge hikes in its combat in opposition to inflation. The strain on households is anticipated to accentuate subsequent 12 months, as round 1.6 million mortgages are anticipated to be refinanced at considerably increased charges.

Sterling fell as the information fueled expectations that the BoE was completed elevating charges and will lower charges as early as Might. The foreign money traded 0.3% decrease at $1.2380, marking its third day of losses in opposition to the buck.

Whereas dwelling requirements enhance with inflation under the speed of wage progress, rising mortgage charges proceed to keep up strain on household budgets. Some fear that shopper warning might tip the economic system into recession subsequent 12 months.

All retail sectors noticed gross sales fall final month, besides non-store retail and “different shops”, which incorporates every thing from pharmacies to bookstores, the ONS mentioned.

Gross sales of family items and car gasoline recorded the biggest declines. A decline in meals gross sales has been blamed on customers prioritizing important items over discretionary spending. Non-fuel gross sales fell 0.1 %.

Some economists stay optimistic, saying decrease inflation and powerful wage progress would help shopper spending.

“Trying forward, we consider a restoration in actual incomes will result in a rebound in retail gross sales,” mentioned Gabriella Dickens of Pantheon MacroEconomics. “The typical weekly wage will doubtless rise quicker than the CPI, which might be held again by negligible will increase in items costs. »

The figures present the influence of the surge in inflation. Whole gross sales have been 16.9% increased in worth than in February 2020, earlier than the pandemic hit, however volumes have been 3.1% decrease.

By Lucy White

Study extra:

U.S. retail sales fall slightly in October

Retail gross sales fell 0.1% final month after months of sturdy positive aspects, reflecting a slowdown in demand that might additional bolster expectations that the Federal Reserve is completed elevating rates of interest. ‘curiosity.