Retail Sales Decline as Living Expenses Rise.

Inflation in the UK, which gauges how quickly prices grow,
fell in August for the first time in over a year,
falling to 9.9% from July's 10.1%. Foto: schiffgold.com.

According to the Office for National Statistics (ONS), sales decreased by 1.6%, a decline that has been ongoing since the summer of 2021 and was significantly higher than economists had anticipated.

The ONS said retail sales declined during the month in all major industries, including food, non-food, online, and fuel. While alcohol and cigarette sales increased by 6.3% in August, supermarket sales volumes decreased by 0.9%.

The monthly sales decline in August was the greatest since December 2021.

"This is markedly worse than the forecast of a 0,5% fall, and indicates rising prices and the cost of living crisis is stopping consumers from reaching for their purse when it comes to extra spending," said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, to the BBC.com.

Households have cut back on spending as a result of rising prices and impending increases in energy costs in October.

The ONS said, "feedback from retailers suggests that consumers are cutting back on spending because of increased prices and affordability concerns".

The ONS reports that sales at department stores fell significantly in August (2.7%), while sales at clothes retailers were only slightly down (0.6%).

John Lewis stated on Thursday that although the number of consumers was greater than the previous year, they were spending less and not purchasing as many "big ticket" items.

For the first half of its fiscal year, the department store and its retail network Waitrose posted a deficit of £99 million. However, it claimed that losing in the first half was not unusual and that Christmas had given it a boost.

Waitrose said that basket sizes had decreased by "almost a fifth" and that sales were down 5% from the previous year.

Following Russia's invasion of Ukraine, food costs have been rising globally, which has been one of the key factors driving up prices at supermarket checkout lines.

While it decreased from 26.3% in July to 25.7% in August, the percentage of retail sales made online is still much higher than it was before the pandemic.

Inflation in the UK, which gauges how quickly prices grow, fell in August for the first time in over a year, falling to 9.9% from July's 10.1%, although it is still at a 40-year high.

Already in Recession

The UK economy is "already in recession," according to Olivia Cross, assistant economist at Capital Economics, who cited August's retail sales numbers to support her claim.

When the economy shrinks for two consecutive three-month periods, it is said to be in a recession.

"Retail sales will probably continue to struggle as the cost of living crisis hits harder in the coming months. But nonetheless, the Bank of England will still have to raise interest rates aggressively," Ms. Cross said.

Any recession would be "smaller and shorter than we had before," according to MS. Cross, because of the government's Energy Price Guarantee, which will cap annual home energy expenditures at £2,500 typical use.

Before the government stepped in, gas and electricity costs were projected to increase to £3,549 and even more by 2023.

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