- Retail sales in September received some support from the panic-buying of petrol, but volumes still fell for the fifth month in a row. A lack of momentum will likely persist, as spending patterns normalise and cost of living pressures grow.
- However, the strong financial position of households and a labour market emerging well from the crisis means the outlook for the retail sector retains some positives.
Martin Beck, senior economic advisor to the EY ITEM Club, says:
“Although a 0.2% month-on-month (m/m) fall in retail sales volumes in September wasn’t as steep as the previous month’s (upwardly revised) 0.6% m/m fall, it continued the downward trend that began in May. And September’s performance would have been weaker, but support came towards the end of the month from people panic-buying petrol, following reports of the closure of some filling stations and a shortage of tanker drivers. Sales of automotive fuel (which accounts for around a tenth of total cash retail spending) rose 2.9% m/m in September compared to an average of 1% over the previous 12 months.
“Excluding fuel, retail sales fell 0.6% m/m, continuing the softness seen over the summer. A post-lockdown shift in spending away from goods and towards services probably contributed to the decline. But a more fragile consumer environment may also have played a role. Amid supply-side disruption, shortages and rising inflation and energy costs, GfK’s measure of consumer confidence in October fell to the lowest level since February.
“Consumer headwinds are, if anything, intensifying, suggesting that the prognosis for retailers is downbeat. However, support should come from households, which are overall are sitting on significant excess savings and the jobs market is coming out of the crisis in unexpectedly good shape. So, in the near term, the EY ITEM Club continues to think that retail spending will probably stabilise around current levels, rather than experience further falls.”