17 November 2023

The latest ONS figures show retail sales volumes decreased by 0.3% in October, driven by household goods (down 1.1%), clothing (down 0.9%) and food sales (down 0.3%). 

Jacqui Baker, head of retail at RSM UK and chair of ICAEW’s Retail Group, comments: 
‘Retailers had high hopes for the start of this year’s Golden Quarter, but sadly wet weather and the cost of living dampened sales this month, as cash strapped consumers held out from splurging on clothing and bigger ticket items to take advantage of Black Friday and Cyber Monday deals in November. 

‘The sharp drop in consumer confidence in October shows that the cost of living pressure remains as high mortgages and rents, interest rates and inflation continue to squeeze household budgets. Although there are subtle signs of these pressures easing, consumers remain cautious and are reluctant to spend unless necessary. 

‘Despite a subdued start to the Christmas trading period there are reasons to be hopeful. With Black Friday and Cyber Monday deals; energy prices falling; and thousands of households benefiting from the Autumn cost of living payment, consumers should feel more confident to spend in the run up to Christmas.’

Thomas Pugh, economist at RSM UK, added: ‘Another fall in retail sales in October suggests spending was muted at the start of Q4. That adds to the risks that the economy will slide into a recession at the end of the year. 

‘However, there are reasons to be hopeful about the outlook for consumer spending. Real wages are now rising and should increase sharply over the next year as inflation drops more steeply than wage growth. That should support consumer spending power over the next year and mean the UK just about avoids a recession. 

‘The problem is that with consumer confidence falling back very sharply in October and savings in real terms back to their pre-pandemic level, many consumers will choose to save any additional income rather than spending. What’s more, for a large portion of households, any increase in incomes will just be eaten up by higher mortgage and rent costs, reducing their disposable income. As a result, while we do expect consumer spending and retail sales volumes to gradually rise, we aren’t expecting the increase in real wages to lead to a boom in consumer spending.’