‘Concern’ for retailers ahead of Christmas as sales and shopper confidence fall
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A closely-watched barometer of consumer confidence is warning of “concern” for retailers ahead of Christmas, as official figures for September show a steep fall in sales.
GfK’s latest Consumer Confidence Index suggested that the willingness of shoppers to spend, particularly on big-ticket items, had plunged since the end of the summer.
The authors reported that households were firmly focused on the evolving cost of living crisis, with every measure declining on the previous month including that for confidence in personal finances over the next 12 months.
The findings were released as the Office for National Statistics (ONS) revealed that total retail sales volumes fell by a much worse than expected 0.9%% last month compared to August, when growth had rebounded following a wet July.
Economists polled by the Reuters news agency had forecast a 0.2% decline.
When fuel sales were stripped out, sales were 0.4% down.
ONS chief economist Grant Fitzner said: “Retail sales fell notably in September with retailers telling us that cost of living pressures are influencing consumers, particularly for sales of non-essential goods.
“It was a poor month for clothing stores as the warm autumnal conditions reduced sales of colder weather gear.
“However, September’s unseasonable warmth did help drive up food sales a little, and fuel sales rebounded from last month’s fall.”
Outlining GfK’s findings Joe Staton, the company’s client strategy director, said: “UK consumer confidence has fallen nine points this month to -30 and takes us back to where we were in July this year.
“This sharp fall underlines that the cost of living crisis, and simply not having enough money to make ends meet, are still exerting acute pressure for many consumers.
“The fierce headwinds of meeting the accelerating costs of heating our homes, filling our petrol tanks, coping with surging mortgage and rental rates, a slowing jobs market and now the uncertainties posed by conflict in the Middle East, are all contributing to this growing unease.
“The timing of the sharp drop in our major purchase measure – down 14 points – will concern retailers across the land in the run-up to Christmas.”
On the future, he added: “The volatility we are seeing in consumer confidence is a sure sign of a depressed economic mood and there’s no immediate prospect of any improvement.”
The prospect of another tough battle for Christmas sales on the high street poses a risk not just to them at a time of heightened costs but also to the country’s flatlining economy.
Household consumption accounts for more than 60% of total output.
Recent forecasts, such as those produced by the Bank of England and International Monetary Fund, have not foreseen a recession ahead but all expect only meagre growth for this year and 2024 given the impact on demand from inflation and rising interest rates.
Financial markets currently see an 80% chance that there will be no interest rate hike at the Bank’s next meeting, due on 2 November, because of further signals its action to date is having an effect on the pace of price increases.
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Data this week suggested that wage growth was starting to ease back from record levels with core inflation, which strips out volatile elements such as food and energy costs, also slowing.
Another school of thought pointed to households holding on to their money ahead of a Christmas splurge.
Deann Evans, managing director for Europe at ecommerce platform Shopify, said: “The latest ONS figures suggest that British retail sales are beginning to slow after a strong end to the summer… but (our) data indicates that consumers are using these months tactically to save in preparation for spending during the holiday season.
“In fact, over half (53%) of UK shoppers have been putting aside more money each month than they have in previous years.”
