UK Retail Sales Post Biggest Drop This Year as Squeeze Tightens

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In August, UK retail sales fell at the fastest pace in eight months as consumers cut back due to the high cost of living.

The amount of goods sold in stores and online dropped more than expected. Retail sales fell for the first time in more than two years.

The slump left sales 5.4% lower than a year earlier, underscoring the growing pressure on consumers as wages fail to keep pace with soaring energy bills.

According to feedback from retailers, consumers are cutting back on spending because of increased prices and affordability concerns.

After the release, the pound fell as much as 0.4%.

Consumers face months of hardship due to sharply rising prices of everything from food to clothes as a result of a £100 billion government subsidy package to stop gas and electricity bills spiking again over the winter.

Many households have been forced to buy less discretionary items due to the squeeze. Shoppers are still better off in cash. Over the last year, the value of goods sold has increased.

In the third quarter, retail sales are likely to be a drag. Unless there is a surge in sales in September, sales will fall.

The Bank of England is expected to keep raising interest rates in an effort to head off a wage-price spiral.

Wage growth is lagging behind inflation but it is still strong by pre-pandemic standards. Unemployment is at a 48 year low and hundreds of thousands of workers are opting not to join the labor pool, as the tight job market shows few signs of easing.

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