‘Flash dawn’ as retail sales rise but tough economy tipped to hit Christmas and beyond
There is little to cheer in the latest official figures, as retailers hope the looming World Cup and Christmas season bolster demand as household incomes are squeezed by high inflation and the impact of the autumn statement ahead.
James Sillars
Business reporter @SkyNewsBiz
Friday 18 November 2022 08:51, UK
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Retailers are hopeful that sales will hold up this Christmas but admit volumes are likely to be down
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Retail sales returned to growth in October, according to official figures released a day after crucial forecasts warned of the biggest fall on record ahead for disposable household income.
The Office for National Statistics (ONS) reported a 0.6% rise in sales volumes last month.
That was after September’s performance – a month-on-month fall of 1.5% – was damaged by the closure of many stores for the Queen’s funeral – muddying the true picture for consumer confidence as the country was tipped to have entered recession.
Economists are united in warning of a downward trend for retail sales ahead, with Pantheon Macroeconomics suggesting the October increase in sales was merely a “flash dawn” led by the unwinding of the store closure impact.
If decades-high inflation was not bad enough, consumer confidence was likely to have been shattered on Thursday following the autumn statement which delivered a painful £55bn round of tax rises and spending cuts aimed at restoring financial market credibility around the public finances.
Chancellor Jeremy Hunt’s measures will drag many people into higher tax bands ahead.
They also included reduced help for energy bills beyond April.
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In its verdict, the independent Office for Budget Responsibility (OBR) forecast that when accounting for inflation, incomes will fall by 7.1% over the two years from 2021-22 to 2022-23.
It will be 2028 before incomes recover to their 2021-22 level, the OBR expected, while it also saw the unemployment rate rising from 3.6% today to 4.9% in 2024.
None of that makes good reading for retailers – already nervous about a big slowdown in consumer spending which has proved to be the rock for the UK economy since the aftermath of the financial crisis.
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Two big names have fallen this month – before Christmas. Made.com and Joules had both struggled with weaker sales.
ONS director of economic statistics, Darren Morgan, said of the latest data: “Retail sales increased in October, although this is likely a rebound effect after weak sales last month as many retailers closed or operated differently on the extra bank holiday for the Queen’s funeral.
“Looking at the broader picture, retail sales continue their downward trend seen since summer 2021 and are below where they were pre-pandemic.”
Helen Dickinson, Chief Executive of the British Retail Consortium, said: “There were drops in purchases of household electricals, while key goods such as pharmaceuticals and footwear held up slightly better.”
She added: “Retailers are hoping sales will pick up a little as the World Cup and festive season approaches, but there is little chance of them catching up with current double-digit inflation.”
