According to polls, consumer concerns about high energy costs and mortgages are also to blame for the decline in retail sales.
Concerns that the UK may enter a period of recession this winter have grown in response to evidence that the country’s struggling households are reducing their expenditure in order to save money for Christmas and to offset rising fuel costs.
According to two monthly snapshot of retail activity, consumer budgets are being squeezed by higher mortgage rates and the ongoing cost of living problem in the UK, which is causing businesses and online retailers to struggle.
Although the Bank of England has increased interest rates fourteen times since December 2021, retailers’ pessimistic views indicate that Threadneedle Street’s efforts to reduce inflation have come at the expense of declining sales volumes and weakened consumer confidence.
According to Barclays, card spending increased by 2.6% in the year ended in October, which was much less than the 6.7% rate of inflation shown by the most recent consumer prices index. Sales in October 2022 increased by 2.5%, according to the BRC/KPMG monitoring of retail activity, however it was emphasized that the statistics were not inflation-adjusted.
The news of the slowdown was revealed when S&P Global Ratings and the Chartered Association of Supply and Procurement released their most recent health assessment on the UK building sector, which revealed housebuilding was down for the eleventh consecutive month.
According to the S&P Global report, all three construction categories—infrastructure, commercial real estate, and housebuilding—were below the 50-point threshold, which separates a sector’s growth from decline. However, housebuilding was the least strong of the three.
Meanwhile, the most recent auto sales data from the Institute of Motor Manufacturer and Traders provided proof that buyers are hesitant to make large purchases. These revealed an almost 30% rise in fleet sales year over year, but just a 0.3% increase in sales to individual buyers, totaling 62,915 units.
“Retail revenue growth slowed as high mortgages and rental rates further shook consumer confidence,” stated Helen Dickinson, CEO of the BRC. Additionally, a lot of homes are postponing their Christmas purchases in the hopes of finding a deal during the approaching Black Friday deals. The “lipstick effect” refers to the fact that more money was spent on low-priced indulgences like cosmetics as a result of the expense of living pressure. In the meantime, sales of fashion were boosted by the entrance of some colder weather.