Retail sales in the U.K. have once again fallen in October, as consumers continue to feel the pinch of high living costs ahead of the important festive season.
According to data from the Office for National Statistics, retail volumes slipped by 0.3% compared to the previous month. This decline follows a 1.1% decrease in September. Economists had predicted a 0.5% increase in sales for the month but were proven wrong.
In comparison to the same month last year, total retail volumes saw a sharper decline of 2.7%, surpassing economists’ expectations of a 1.6% decrease. This figure represents the lowest volume recorded since February 2021, when the pandemic heavily impacted shopping due to sanitation measures.
The rising interest rates are adversely affecting consumer spending, as noted by Alex Kerr at Capital Economics. Kerr states that as this drag continues, retail activity is expected to remain weak leading up to the crucial festive period. He anticipates that spending will continue to decline in the coming quarters.
In October, volumes dropped across all categories, signaling a continued decline in sales outside of food stores and fuel from the previous month.
Retailers Face Challenges as Consumer Spending Declines
Retailers in the UK have cited multiple factors contributing to a recent fall in consumer spending. According to the Office for National Statistics (ONS), the cost of living, reduced footfall, and wet weather in the latter half of the month have all played a role in this decline. Additionally, a warmer start to the month led consumers to delay purchases of winterwear.
Deann Evans, the managing director for EMEA at ecommerce platform Shopify, suggests that shoppers are generally holding back on spending as they prepare for the upcoming festive season. “Our data suggest that many shoppers have used recent months tactically to save in preparation for the holiday season,” Evans explains.
According to Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, the situation may improve with stronger spending power. Dickens predicts a rebound in retail sales as real incomes recover, leading to increased consumer confidence.
However, Erin Brookes, retail lead at consultants Alvarez & Marsal, expresses concern over the decline in consumer spending for a second consecutive month. As the festive shopping season approaches, retailers will need to focus on core strategies to encourage shoppers to spend during crucial periods such as Black Friday and Christmas.
While challenges persist, key experts in the industry remain hopeful that retail sales will pick up in the coming months. It will be interesting to observe consumer behavior as they seek the best offers and deals during these important sales periods.