UK retail sales fell at the sharpest pace in eight months in August, as consumers cut back across the board in response to the soaring cost of living.
The quantity of goods sold in stores and online fell 1.6 per cent from July — more than three times the drop predicted by economists. All categories of sales saw declined for the first time since July 2021.
The fall left sales 5.4 per cent lower than a year earlier, underscoring the growing pressure on consumers as wages fail to keep pace with soaring energy bills and the fastest inflation in decades.
“Feedback from retailers suggests that consumers are cutting back on spending because of increased prices and affordability concerns, the Office for National Statistics said.
The pound extended its drop after the release, falling as much as 0.4 per cent to $1.1418.
A £100 billion (€114 billion) government subsidy package to stop gas and electricity bills spiking again over the winter may be enough to avert a recession, but consumers face months of hardship amid sharply rising prices of everything from food to clothes.
The squeeze has sent consumer confidence plunging, with many households forced to buy fewer discretionary items in order to afford the essentials. Despite the cutbacks, shoppers are no better off in cash terms. The value of goods sold has risen by more than 5 per cent over the past year.
Retail sales are almost certain to act as a drag on the economy in the third quarter. Sales will fall over the period unless September sees a 3.1 per cent surge.
The plight of consumers is unlikely sway the Bank of England, which is expected to keep raising interest rates — including a possible 75 basis-point hike next week — in an effort to head off a wage-price spiral.
Wage growth may be lagging behind inflation, but it remains strong by pre-pandemic standards at more than 5 per cent. Meanwhile, the tightest job market in living memory is showing few signs of easing, with unemployment at a 48-year low and hundreds of thousands of workers opting not to rejoin the labour pool. — Bloomberg.
