Press release

16 Dec 2022 London, GB

The retail downturn deepened in November – EY ITEM Club comments

Martin Beck, Chief Economic Advisor to EY ITEM Club, provides comments on the latest public finance news.

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  • Retail sales resumed their downward trend in November, after the data for the previous two months had been distorted by the extra bank holiday in September. Sales volumes are on track to fall by more than 2.5% in 2022, partly reflecting a normalisation of spending patterns after Covid restrictions were lifted, but also due to the continued squeeze on household spending power.
  • The outlook for retail sales remains very weak, with wages likely to continue to fall in real terms well into 2023, unemployment expected to increase, and the support for households to help pay their fuel bills set to be reduced. The EY ITEM Club think that another large fall in sales volumes looks likely in 2023. 

Martin Beck, chief economic advisor to the EY ITEM Club, says: “In November retail sales fell by 0.4% month-on-month on an including fuel basis. On a sectoral basis, the fall in sales was relatively broad-based, with only the food sector reporting a pickup. Nevertheless, the increase in sales at food stores followed four successive declines and – in common with other categories – sales remain much lower than they were at the start of this year.

“Unlike many of the years immediately before the pandemic, there were no obvious distortions in November's data from Black Friday.

“With just one month's worth of data still to go, it looks like retail sales volumes probably fell by more than 2.5% in total during 2022. Though this was partly a story of spending patterns normalising after the end of social distancing restrictions, it also reflected the continued squeeze on household spending power. The EY ITEM Club expects the pressure on household budgets will remain severe in the near-term, with wage growth continuing to run well below inflation, signs that weak activity is beginning to cause a rise in unemployment, and the reduction in the generosity of the cap on energy bills next spring. Given this weak outlook, the EY ITEM Club expects to see another large fall in retail sales volumes in 2023.”