Sep 16, 2022 02:39AM ET
By:AnalysisWatch
Retail sales in the UK recorded their biggest fall of the year in August, down 1.6%, as the cost-of-living crisis more than offset a slight easing in fuel prices in the month.
The Office for National Statistics said sales volume was down 5.4% from a year earlier, after all major retail categories posted declines in August.
The figures were well below analysts' expectations, who had expected a 0.5% drop for the month and 4.2% for the year, and they add to the picture of an economy sliding rapidly into recession as rising household energy bills and widening price increases hit consumers' pocketbooks.
"While the drop in retail sales in August was larger than most anticipated, it was not at all surprising given the low level of consumer confidence," tweeted Gabriella Dickens, an analyst at Pantheon Macroeconomics.
The analyst argues that the weakness "will help tip the balance" toward a smaller interest rate hike at next Thursday's Bank of England policy meeting. Dickens believes the Monetary Policy Committee will raise interest rates by half a percentage point, rather than the 75 basis point increase expected by markets.
The prospect of the Bank of England slowing the pace of monetary tightening undermined the pound in foreign exchange markets. It briefly fell to a new 37-year low of $1.1408 before paring its losses and trading at $1.1427 at 04:10 ET (08:10 GMT).
Grocery store sales volume fell 0.8%, while non-food sales fell 1.9% and fuel sales volume fell 1.9%. Fuel sales are down 9% from their level before the Russian invasion of Ukraine, which sent prices of all energy products soaring.
The U.K. data differs from the U.S. retail sales data in that they exclude the hospitality sector. As such, they are more sensitive to the recovery in on-trade spending that has followed the lifting of COVID-19 restrictions earlier this year.