UK retail sales slide again in October in new blow for economy

People shop on Oxford Street in London, Britain April 10, 2023. Photographer Anna Gordon/File Photo

By Reuters

British retail sales volumes fell unexpectedly in October as stretched consumers stayed at home, official data showed on Friday, in a new warning sign for the economy.

Retail sales volumes dropped 0.3% month-on-month, following a revised 1.1% decline in September that was worse than first estimated, the Office for National Statistics (ONS) said.

Economists polled by Reuters had forecast that sales volumes would rise by 0.3% on the month in October.

Overall the figures fitted with the darkening outlook for Britain’s economy, with economic growth stagnant and strong price pressures now fading, albeit slowly.

Investors think these factors will force the Bank of England to lower interest rates next year.

“Retailers suggested that cost of living, reduced footfall and the wet weather in the second half of the month contributed to the fall,” the ONS said.

Excluding petrol, sales volumes fell 0.1% fall on the month. The figures also showed a downward revision for sales during the third quarter.

“The impact of higher interest rates is building,” said Martin Beck, chief economic adviser to the EY ITEM Club consultancy.

“But retailers aren’t out of supports. In the short-term, October’s drag from weaker fuel sales may reverse as recent falls in oil prices feed through to lower pump prices,” Beck said.

Given the fine margin by which Britain avoided an economic contraction during the third quarter, Friday’s figures showed a risk that GDP could yet be revised lower to a negative reading.

Compared with last year, retail sales were 2.7% lower – a worse outcome than any of the economists polled by Reuters had forecast.

Retail sales volumes have fallen back to 2018 levels.

Still, retailers hope the crucial Christmas trading period will yield better times.

Despite recent downbeat economic data and consumer surveys, major retailers including Tesco, Sainsbury’s, Next, Primark (ABF.L) and Marks &Spencer have sounded confident about their prospects in the run-up to Christmas.