UK Retail Sales Drop as Shoppers Limit Spending

The UK saw its retail sales unexpectedly declined for the second straight month in October, as consumers pressed pause on winter clothing purchases because of the warm weather and as they tighten their belts after spending heavily during summer.

Official data showed retail sales volumes last month alone fell 0.5 percent from September, which was opposite of the 0.2 percent growth expected by economists.

On a yearly basis, growth slowed to 2.2 percent from a positively adjusted 3.3 percent in September, the slowest since April and lower than what economists had predicted as they forecast for it to hold at September’s original 3.0 percent reading.

Rhian Murphy, a statistician at the Office for National Statistics (ONS), said retail sales slowed after a buoyant summer with the mild autumn hitting winter clothes sales, adding that household goods sales also fell after strong growth in the two previous months.

With the three months to October combined, the volume of sales slowed 0.4 percent from 1.2 percent, also the weakest since April.

Brexit Uncertainty Hits Retail Sales

The UK’s economy has slowed since June 2016’s Brexit vote, although it benefitted from a strong summer, with household expenditures climbing 0.5 percent in the three months to September.

However, less than five months before the UK is due to leave the European Union (EU), signs of some respite for households have started to appear this week.

Underlying pay growth increased to its fastest rate since 2008 at 3.2 percent and inflation was steady at 2.4 percent last month, despite expectations of a modest rise.

The drop was the first real sign that shoppers are keeping their spending in check due to uncertainty over Brexit, according to economist Samuel Tombs.

Tombs stated that consumer’s confidence already has weakened in recent months due to concerns about the economic outlook and it is unlikely that households are feeling any surer that a no-deal Brexit will be avoided after this week’s political turbulence.

Unless the government miraculously manages to force the current withdrawal agreement through parliament soon, growth in consumer’s spending will weaken markedly in the fourth quarter, he added.

Still, October data from a British trade association and a credit card company showed households were making cautious purchases after cutting back on spending in September, and that some consumers were holding off shopping plans ahead of the anticipated Black Friday sale in November.

ONS’s report released on Thursday showed the sharpest monthly slump in purchases of household items, like electronics and home appliances, since December 2017.

High oil prices also left year-on-year growth on the volume of fuel sold at its weakest since March 2017. Economist Thomas Pugh said they expect that there could a rebound in sales volumes this month as oil prices have declined sharply and if Black Friday sales pick up.

Head of retail Ian Geddes stated that they expect this year’s Black Friday to generate record levels of UK spending, which will likely boost November’s retail figures overall.

Whether it will be enough to make this a golden quarter remains to be seen, he added.

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