Official figures show retail sales fell unexpectedly in October as cash-strapped consumers reined in their spending and poor weather kept people from visiting the high street.
According to the Office for National Statistics (ONS) data, retail sales volumes slipped 0.3% month-on-month to the lowest level since February 2021 when large parts of the UK were in Covid lockdowns. Analysts had been expecting a small rise in sales last month as consumers started their Christmas shopping.
The ONS noted that automotive fuel sales volumes fell by 2.0% in October amid increasing petrol prices.
Demand for other goods was also lower, with food store sales volumes down 0.3% last month from being unchanged in September. Supermarkets reported an increase in sales volumes of 0.2% over the month, while both specialist food stores (such as butchers and bakers) and alcohol and tobacco stores reported falls of 4.2% and 10.4%, respectively. Retailers noted that consumers were “buying cheaper products and prioritising important items”.
Non-food stores sales volumes fell by 0.2%, following a 2.1% fall in September. Retailers questioned by the ONS suggested that the cost of living crisis, reduced footfall, and the wet weather in the second half of the month had contributed to the fall. Household goods retailers (-1.1%) and clothes stores (-0.9%) were worse affected.
Meanwhile, online sales rose by 0.8% in October, following a fall of 2.4% in the previous month.
The worse-than-expected data comes after recent GDP figures showed the UK economy flatlined between July and September, with the Bank of England expecting only subdued growth until 2025.
Next week, Chancellor Jeremy Hunt will make his Autumn Statement when he will set out the government’s tax and spending plans and his strategy to grow the economy.
Lisa Hooker, leader of industry for consumer markets at PwC, said: “We know from earlier in the year that in tough times consumers prioritise special events and family occasions, so retailers will be hoping that consumers are keeping their powder dry for a last minute Christmas spending surge come December.”
Oliver Vernon-Harcourt, head of retail at Deloitte, added: “October’s worse-than-expected retail sales performance represents further signs of weak consumer spending. This follows a prolonged period of economic strain on consumers’ personal finances, driving cautious spending in both essentials and discretionary categories.
“However, with inflation easing more sharply than expected, and with the ‘Golden Quarter’ in full swing, retailers will be hoping for a fruitful festival period, as more consumers expect to spend more this Christmas compared to last year. It remains a highly competitive environment, and retailers will need to prioritise maintaining good availability and an efficient, enjoyable customer experience both in-store and online.”
NAM Implications:
- As demand weakens, any sales growth will be at the expense of rivals…
- Nothing is really happening to make it different.
- Lower prices and access to ‘equivalent’ own-label will count in the final lap to Christmas.
- Fingers crossed for a Christmas uptick…
- …but avoiding excessive holding of breath!
