Retail sales across Great Britain saw a sharper-than-expected decline in September, delivering a negative economic signal just days before Chancellor John Healey presents his upcoming budget. According to the Office for National Statistics (ONS), the volume of goods sold fell by 0.4% on a monthly basis, significantly worse than the 0.1% decline anticipated by economists.
This downturn follows a stronger performance in August, which saw a revised monthly rise of 0.7%. Despite the September dip, sales volume managed to grow 0.7% over the three months leading up to the end of September compared to the previous quarter. Hannah Finselbach, a senior statistician at the ONS, noted that this quarterly growth was driven largely by motor fuel sales and earlier strength in food and drink demand, though the latter weakened as the quarter concluded.
Automotive fuel was the primary outlier in September, with sales volumes soaring 2.2% month-on-month despite record-high prices at the pump. This rise, marking a 6.1% increase in value terms, brought fuel consumption back to levels not seen since before the Middle East conflict began. Aside from a marginal 0.2% increase in department store sales, nearly all other retail sectors faced declines. The 6.1% increase in fuel sales was the biggest month-on-month increase since 10.9% was recorded in March, the month immediately after the start of the US-Iran conflict, in value terms.
Online retailers bore the brunt of the contraction, with non-store sales falling 2.2%. Meanwhile, clothing, footwear, and textile retailers reported a 0.9% decrease. Supermarkets also saw a 0.4% dip, which analysts attribute in part to poor seasonal clothing sales caused by unusually warm weather in September. Textile, clothing and footwear stores recorded a 0.9% fall, household goods retailers were hit by a 0.5% sales slump, while supermarkets dipped 0.4%, partly because of poor sales of clothing ranges due to the weather.
Economists have highlighted the broader implications of these figures as the industry enters the crucial festive trading period.
Paul Dales, chief UK economist at Capital Economics, pointed out that the data reflects a sharp decline in consumer confidence, which has reached its fastest rate of descent since the Covid-19 pandemic.
Dales warned that the current trend suggests real GDP and consumer spending could stagnate throughout the final quarter of this year and the start of next year.
Beyond the retail sector, the eroding consumer sentiment poses political challenges. Dales observed that the cooling economic outlook makes it increasingly unlikely for the prime minister to schedule an early election in the near term. With households clearly tightening their budgets, the focus now shifts to the Chancellor’s budget announcement scheduled for next week.
