UK retail sales drop for fifth month in a row

24 October, 2021
UK retail sales drop for fifth month in a row
British retail sales dropped for the fifth month in a row in September, adding to signs of weakness in the economic recovery amid a rise in the number of Covid-19 cases.

The volume of goods sold in stores and online fell 0.2 per cent last month, the Office for National Statistics said on Friday, in the longest period of consecutive monthly declines on record, with the decline coming despite panic buying for petrol during the fuel shortage.

“Household goods were the main driver of this month’s decline with a fall of nearly 10 per cent, according to ONS director of economic statistics Darren Morgan, while food sales rose after falling in August.

“Despite the lifting of restrictions, in-store retail sales remain subdued, with many consumers still opting to shop online," he said.

While retail sales are still 4.2 per cent higher than in February 2020, before Britain went into lockdown, they are now 1.3 per cent lower than a year ago as supply chain bottlenecks leave gaps on supermarket shelves.

Many petrol stations ran out of fuel in late September and early October after a shortage of lorry drivers affected tanker deliveries, with lines of cars snaking out of garage forecourts as people desperately tried to fill up.

Fuel sales in September exceeded pre-pandemic levels for the first time, the ONS said, rising 2.9 per cent in the month. While that boosted sales at some filling stations, it depressed it at others that did not have supplies.

Retail sales excluding fuel were down a bigger-than-expected 0.6 per cent on the month.

The overall drop was caused by a fall in sales volumes in non-food stores, with lighting and furniture businesses the hardest hit. While shoppers opted to avoid high streets, sales online continued to rise, accounting for 28.1 per cent of all spending - up from 27.9 per cent in August.

“Retailers will be concerned by the slump in sales, just as they begin their preparations for the all-important Christmas period,” said Helen Dickinson, chief executive officer of the British Retail Consortium. “Fuel shortages, wet weather, and low consumer confidence all contributed to lower consumer demand this month, with household goods, furniture and books all hit particularly hard.”

Clothing and department stores reported an increase in monthly sales volume of 4.3 per cent and 0.2 per cent.

While UK retail sales grew strongly in the first part of the year, particularly after lockdown restrictions eased for shops on April 12, they have dropped off since partly as consumers chose to socialise once Covid-19 curbs eased on dining out. With new coronavirus cases topping 50,000 a day on Thursday, there are fears restrictions could return.

There was a September surge in clothing sales, as shoppers back from staycations revamped their wardrobes ready for an autumn of socialising,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

“More staff have hot footed it back to the office after an 18 month break, so it’s likely revamping work wardrobes was also a priority. In this strive for self-improvement, spending has moved away from home-improvement, with furniture and lighting sales in particular falling off dramatically.”

Meanwhile, consumer confidence dropped sharply in October, a separate survey from research company GfK showed.

“The sharpest concern is how consumers see the future economy,”’ said Joe Staton, client strategy director at GfK.

“Against a backdrop of cheerless news — food and fuel shortages, surging inflation, squeezing household budgets, the likelihood of rate rises and climbing Covid rates — it’s not surprising that consumers are feeling down.”

Despite the gloomy retail sales, Britain's economy unexpectedly regained momentum in October, with the preliminary "flash" IHS Markit/CIPS flash Composite Purchasing Managers' Index rising by the largest amount since May to hit 56.8 from September's 54.9, however cost pressures rose by the most in more than 25 years.

The PMI rise was driven by Britain's services firms as consumers and businesses picked up their spending and travel firms benefited from easing Covid-19 movement rules.

However, cost pressures remain with higher wages and worsening supply shortages resulting in the fastest increase in average costs since the combined composite index was launched in 1998. Separate PMIs for the services and manufacturing sectors showed prices charged by firms rose by the most since these series began in the 1990s.

"The UK economy picked up speed again in October, but the expansion is looking increasingly dependent on the service sector, which in turn looks prone to a slowdown amid the recent rise in COVID-19 cases," said IHS Markit's chief business economist, Chris Williamson.

Bank of England policymakers are concerned supply shortages and consumers splashing out after the end of lockdown are fanning inflationary pressure, with Bank of England chief economist Huw Pill expecting inflation to exceed 5 per cent by early next year.

Financial markets expect the central bank to lift interest rates next month, although Mr Pill said the decision was “finely balanced".

Stuart Cole, chief macroeconomist at brokerage Equiti Capital, said the another disappointing set of retail sales figures from the UK will do nothing to "assuage fears that the economic recovery is in danger of stalling".

It will also "provide a headache for the BoE" as to whether the "recovery is strong enough to withstand a tightening in monetary policy", he added.

"With Covid cases rising, speculation growing that the Government may be forced to introduce now lockdown measures over the winter months, tax rises in the pipeline and inflation rising, the prospects for a significant pick-up in consumption looks unlikely at the current juncture," he said.
Source: www.thenationalnews.com
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