Daily Management Review

September Sizzler Affects UK Retailers As Consumers Steer Clear Of Autumnal Styles


September Sizzler Affects UK Retailers As Consumers Steer Clear Of Autumnal Styles
In September, British retail sales declined more than anticipated as consumers refrained from purchasing autumnal apparel during unusually mild weather. This occurred against a backdrop of larger constraints related to the cost of living, which may cause the economy to contract in the third quarter.
The Office for National Statistics (ONS) said on Friday that retail sales volumes fell by 0.9% for the month following a 0.4% increase in August. This was a significantly larger reduction than the 0.2% fall that economists had predicted in a Reuters poll.
"It was a poor month for clothing stores as the warm autumnal conditions reduced sales of colder weather gear. However, September's unseasonable warmth did help drive up food sales a little," ONS Chief Economist Grant Fitzner said.
Last month, Britain had its second-hottest September on record. H&M, a clothes company, claimed that the heat wave had hurt sales throughout most of Europe.
The third quarter saw a 0.8% decline in sales volumes overall, the largest since the three months ending in February. This decline was made worse by an exceptionally rainy July that defied typical summer spending trends.
In light of the second quarter's 0.2% GDP growth, the ONS estimated that the poor retail performance would likely cut quarterly GDP growth by 0.04 percentage points. This is a significant amount.
"The sharp fall in retail sales in September makes it increasingly likely that GDP flatlined or even fell in September. That would mean that GDP as a whole contracted in Q3," said Thomas Pugh, an economist at accountants RSM UK.
Following the data, the value of sterling fell somewhat vs the US dollar.
The ONS attributed September's 1.6% decline in clothing sales volumes and the 2.3% monthly sales decline in household goods stores—the largest monthly decline this year—to the persistent challenges imposed by the rising cost of living.
Over the past two years, supply-chain challenges and manpower shortages following the COVID-19 outbreak have put pressure on British households' cost of living. These issues have been made worse by an increase in energy prices following Russia's invasion of Ukraine.
Retail sales volumes have been below pre-pandemic levels for the past year, notwithstanding a spike in mid-2021 when stores in Britain fully reopened following COVID-19 restrictions. Since then, purchases have been declining slowly.
Despite consumers paying 17% more, September's volume of items purchased was 3% less than in 2019, according to figures released on Friday.
In September, the annual rate of inflation in consumer prices in Britain was 6.7%, the highest of any major advanced country.
As retailers head into the crucial pre-Christmas season, when many generate the majority of their revenues, the future seems uncertain.
Data from the longest-running consumer mood poll in Britain, released earlier on Friday by GfK, indicated a decline in morale in October and a tendency to hold off on making large purchases.
According to a research released on Monday by accountants PwC, nearly one-third of British people intended to spend less on Christmas this year, primarily as a result of rising food and energy prices.
Shopify, an online marketplace, reported that while almost 75% of consumers had reduced their discretionary spending in the previous few months, the majority had started saving more than a year earlier in order to cover additional Christmas expenses.
"Despite fears that the run up to Christmas is a challenging time for retailers, data indicates we could see retail footfall increase, both online and offline," Shopify's managing director for Europe, the Middle East and Africa, Deann Evans, said.