However, the decline recorded for September leaves retail sales volumes in the third quarter down by 0.8% on the preceding three months, according to the seasonally adjusted data from the ONS.
Households have come under pressure from the surge in UK base rates from a record low of 0.1% in December 2021 to 5.25%. And another winter is looming with excruciatingly high household energy prices.
The EY ITEM Club think-tank had little cheer to provide as it looked at the prospects for retail sales.
Martin Beck, chief economic adviser to the EY ITEM Club, said: “Retail sales volumes fell 0.9% month-on-month in September, meaning that August’s modest rebound proved only temporary. Lower sales in September were driven by large falls in the non-food and non-store retailing sectors, with the Office for National Statistics suggesting that warmer weather weighed on clothing purchases. These falls more than offset a marginal rise in food sales, while fuel sales also increased slightly.”
He added: “September’s decline left sales down 0.8% quarter-on-quarter in Q3. And the EY ITEM Club thinks retail sales are likely to underwhelm over the rest of 2023 as the impact of higher interest rates grows. An increasing number of mortgagors are reaching the end of fixed-rate deals and face a significant increase in debt-servicing costs when they refinance. As a result, the drag on household disposable income from this source is set to increase. And evidence of a weaker jobs market likely won’t help either, with unemployment rising and demand for workers appearing to be decreasing.”
He noted “some glimmers of hope for retailers”, declaring that “consumer spending power should be supported by lower inflation and average wages now rising again in real terms”.
Mr Beck said: “The financial position of households, in aggregate, is relatively healthy, reflecting unplanned saving during the pandemic and a paying down of unsecured debt in recent years. But the EY ITEM Club is sceptical these factors will be enough to outweigh the large impact on disposable income from higher borrowing costs that’s gradually passing through to households. Therefore, sales are likely to remain sluggish at best for the foreseeable future.”
