U.K. Retail Sales Fell 1.6% in August as Slowdown Intensifies
By Geoffrey Smith
Investing.com -- U.K. retail sales posted their sharpest fall of the year so far in August, dropping 1.6% as the cost-of-living crisis more than offset some modest relief from fuel prices in the month.
The Office for National Statistics said sales volumes were down 5.4% from a year earlier, after all major categories of retailers posted declines in August.
The figures were well below analysts' expectations for a drop of 0.5% on the month and 4.2% on the year and add to a picture of an economy sliding quickly into recession, as the surge in household energy bills and increasingly broad price increases hit consumers' wallets.
"While the drop in retail sales in August was larger than most anticipated, it was pretty unsurprising given the low level of consumers' confidence," tweeted Gabriella Dickens, an analyst with Pantheon Macroeconomics. She argued that the weakness "will help tip the balance" toward a smaller interest rate increase at the Bank of England's policy meeting next Thursday. Dickens expects the Monetary Policy Committee to raise rates by half a percent, rather than the 75 basis point move expected by markets.
The prospect of the Bank of England slowing down the pace of monetary tightening undermined the pound on the foreign exchange markets. It fell briefly to a new 37-year low of $1.1408 before paring its losses to trade at $1.1427 by 04:10 ET (08:10 GMT).
Food store sales volumes fell 0.8%, while non-food sales fell 1.9% and fuel sales volumes fell 1.9%. Fuel sales are now down 9% from their level before Russia's invasion of Ukraine, which sent prices for all energy products skyrocketing.
The U.K.'s data differ from U.S. retail sales data in that they exclude the hospitality sector. As such, they are more sensitive to the recovery in spending on hospitality that has followed the lifting of Covid-19 restrictions earlier this year.
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