UK Shop Sales Slow as Consumers Shift Spending Toward Essentials
(Bloomberg) — UK retailers said sales growth slowed in October as a surge in prices pushed more consumers to focus on essentials instead of new clothing and household accessories.
The British Retail Consortium said like-for-like sales in shops fell to 1.2% last month from 1.8% in September. Surging inflation means consumers are paying more to buy less, meaning retailers are moving lower volumes of merchandise at higher prices.
“With November Black Friday sales just around the corner, many people look to be delaying spending, particularly on bigger purchases,” Helen Dickinson, chief executive officer of BRC, said in a statement Tuesday. “Clothing and footwear declined as the mild weather meant customers held back on buying winter outfits.”
Inflation rising at a 40-year-high of 10.1% is delivering the tightest squeeze on consumer spending power in memory and weighing on the outlook for retailers. The Bank of England is concerned that prices are rising much faster than its 2% target and has lifted interest rates eight times in the past year to curb inflationary forces.
BRC said its members are noticing changes in spending patterns as a result of the cost-of-living crisis and uncertainty around how much they will pay for energy after April 2023. While shoppers are increasingly shunning luxury items, they are also reducing their expenditure on essentials too. The value of food and drink sales increased in the BRC’s October figures, but not even close to current inflation levels, meaning people are buying fewer groceries.
A separate report from Barclaycard, which handles UK credit and debit card transactions, also showed the impact of soaring costs. Card spending grew 3.5% year on year, but 67% of British consumers were looking for ways to stretch their budget, with almost half opting for low-cost or own-brand goods to save money.
“Consumers continue to swap big nights out for cosy evenings,” saidd Esme Harwood, a director at Barclaycard. “We’re likely to see further cutbacks. Consumers are adopting a restrained approach to festivities.”
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