Retail sales fall at quickest rate since financial crisis
High inflation and weak wage growth has left workers with less money to spend. And retailers are being hit as they see sharpest fall in sales since the height of the financial crisis.
A new report shows a “significant drop” in retail sales in the year to October. The report by the Confederation of British Industry (CBI) said the fall is at the “quickest rate since March 2009 – the height of the financial crisis.”
Whilst 15% of retailers surveyed said sales volumes were up in October compared to a year ago, 50% said their sales were down. The survey also showed a fall in orders being placed by retailers with suppliers. 57% said they placed fewer orders compared to a year ago. Only 14% said they placed more orders then the same period last year. This suggests that as consumers are holding back on spending, retailers are also beginning to hold back on investing. The survey showed internet sales was also hit by softening consumer spending with a fall in growth compared to last year.
Here’s how CBI’s retail sales index loos in a chart as tweeted by Bloomberg’s Jonathan Ferro:
UK cbi retail sales index just fell off a cliff pic.twitter.com/q98qsGbGWk
— Jonathan Ferro (@FerroTV) 26 October 2017
Commenting on the figures, CBI chief economist Rain Newton-Smith said: “It’s clear retailers are beginning to really feel the pinch from higher inflation.” Newton-Smith added: “While retail sales can be volatile from month to month, the steep drop in sales in October echoes other recent data pointing to a marked softening in consumer demand.”
The referendum vote last year saw a sharp fall in the pound, which has been the main driver for the high inflation rate. Giving evidence to MPs last week, Bank of England governor Mark Carney said: “The sole reason that inflation has gone up as much as it has is the depreciation of sterling.” He further said that he expected inflation to rise further over the next few months.
High inflation combined with weak wage growth has also meant a pay squeeze for workers. With less money and goods at higher prices – both a result of high inflation – a fall in consumer spending was expected. However, as Reuters reports, the CBI’s reading on retail sales eclipsed even the lowest forecast of economists polled by the news agency.
CBI surveyed 106 firms, which included 49 retailers. Other businesses in the survey included wholesalers and motor traders. You can find more on the report at cbi.org.uk.