UK retail sales plummet, highlighting recession risk

A man carries a Union Jack themed shopping bag as he walks along an empty shopping street in Blackpool, Britain March 9, 2021. REUTERS/Phil Noble/File Photo

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  • UK retail sales fall 1.6% m/m in August vs. 0.5% forecast
  • ONS says all retail sectors affected by decline
  • Data highlights UK recession risk
  • Primark, ASOS and Ocado all warned of profits this month

LONDON, Sept 16 (Reuters) – British retail sales fell much more than expected in August, a further sign that the economy is sliding deeper into recession as the cost of living crisis squeezes disposable household spending.

Retail sales volumes fell 1.6% in monthly terms in August, the Office for National Statistics said – the biggest drop since December 2021 and worse than any forecast from a Reuters poll of economists which had indicated a decline of 0.5%.

The data is likely to add to concerns about the strength of demand in the UK economy. British fashion retailers Primark (ABF.L) and ASOS (ASOS.L) and online supermarket Ocado Retail (OCDO.L) all issued profit warnings this month. Read more

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The pound slid further towards $1.14 on the back of the data.

“With a tough winter ahead, retailers will worry that shoppers have already got their spending under control despite the hot summer,” said Lynda Petherick, head of retail at Accenture.

All major retail sectors – food stores, non-food stores, non-store retail and fuel – fell in the month for the first time since July 2021, when COVID-19 restrictions on the hospitality have been lifted, the ONS said.

The period of mourning following Queen Elizabeth’s death poses another challenge for retailers, with widespread business closures scheduled for Monday to mark the Queen’s funeral.

“The gloomy atmosphere in the UK this week and news of slow economic growth will add to retailers’ sense of anxiety as the weather cools,” Petherick said.

Although inflation fell below 10% last month, households are still grappling with the biggest price increases since the early 1980s, caused mainly by soaring energy prices following of the Russian invasion of Ukraine.

The ONS said people had reduced their purchases of furniture in the past month.

“Retailer feedback suggests consumers are cutting back on spending due to rising prices and affordability issues,” he said.

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Additional reporting by James Davey, editing by William James and Hugh Lawson

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