In both the US and UK, retail sales experienced a decline in October and December, raising concerns for the upcoming holiday shopping season. In the US, retail sales fell by 0.1% in October, marking the first decline since March [15ad46b8]. This decline was lower than the expected 0.3% decline [2e4be436]. The drop in sales was primarily attributed to a decrease in sales of big-ticket items such as cars and furniture, while sales at restaurants and supermarkets remained strong [2e4be436]. The slowdown in retail sales raises concerns about the impact of inflation and economic conditions on consumer spending. However, the Federal Reserve sees this decline as a positive indicator that spending isn't accelerating and there are no significant signs of economic weakness [2e4be436]. Despite concerns about inflation and borrowing costs, rising wages and low unemployment rates are expected to continue fueling consumer spending, with experts predicting a solid 4% increase in sales during the holiday shopping season [15ad46b8].
Similarly, in the UK, retail sales dropped to their lowest level since 2021 in October and experienced a further decline in December [273fbf61] [76553cbd]. In December, UK retail sales fell at their fastest pace since the nation was in a Covid-19 lockdown three years ago, with the volume of goods sold in stores and online falling 3.2% [76553cbd]. This decline in sales indicates a slowdown in consumer spending and has been attributed to supply chain disruptions, rising inflation, and the risk of the UK economy sliding into a shallow recession [273fbf61] [76553cbd]. The decline in retail sales is concerning for the UK economy, as consumer spending is a key driver of economic growth. The data suggests that consumers are becoming more cautious with their spending due to the uncertain economic conditions. Retailers are now facing challenges in managing inventory and meeting customer demand amidst the ongoing supply chain issues. The decline in retail sales highlights the need for government intervention and support to address the challenges faced by the retail sector [273fbf61] [76553cbd].
UK retailers faced another tough month in July 2024, as poor weather, high inflation, and market uncertainty dragged the retail sales balance down to -43 from -24 in June, according to the Confederation of British Industry (CBI) [bffe3342]. The retail sales balance further declined to -43 in July, marking a significant drop from June's already negative position of -24 [bffe3342]. Key factors include unseasonably cool weather and high inflation, which collectively squeezed consumers' purchasing power and deterred spending [bffe3342]. The CBI projects slight improvement in August, with the sales balance expected to rise to -32. Larger economic trends offer some consolation, with wages rising faster than inflation and a 0.4% increase in overall economic output between April and May 2024 [bffe3342].
British shop prices rose at the joint-slowest rate since October 2021, with a mere 0.2% annual increase in July. Food prices saw the smallest increase since December 2021 at 2.3%, while non-food prices dipped 0.9%, dragged down by falling clothing and footwear costs for the seventh straight month, and cheaper books [14e44a23]. The British Retail Consortium (BRC) credits weak demand for this trend, while BRC’s Chief Executive points to summer wear and reads as prime bargain territory [14e44a23]. Bad weather and challenging trading conditions pushed retail sales down, according to the Confederation of British Industry (CBI) [14e44a23]. The Bank of England remains focused on high services inflation, which hit 5.7% in June [14e44a23]. Falling prices may attract consumers, but retailers must navigate the dual challenges of recovering from past inflation and preparing for potential future price hikes [14e44a23]. The BRC cautions that food prices might rise again as the effects of previous commodity price drops wane and recent extreme weather impacts harvests [14e44a23]. Long-term challenges persist for both consumers and the broader economy [14e44a23].
The decline in retail sales in both the US and UK raises concerns about the overall health of the economies and the impact of inflation on consumer spending [15ad46b8] [273fbf61] [76553cbd] [bffe3342] [14e44a23]. It also emphasizes the importance of addressing supply chain disruptions and supporting the retail sector to ensure economic growth and stability. Retail sales play a significant role in driving overall economic activity, making it crucial to monitor and address the factors affecting consumer spending [2e4be436] [273fbf61] [76553cbd] [bffe3342] [14e44a23].
