Retail sales have hit their lowest level since the February 2021 Covid lockdown, according to the Office for National Statistics (ONS).
The ONS said retail sales fell by 0.3% in October, following a fall of 1.1% in September (revised from a fall of 0.9%), confounding expectations for a rise of 0.3%.
Panmure Gordon's Simon French said it was a "tough set" of data with a challenging start to the fourth quarter with evidence of delayed seasonal spending, unseasonally warm weather and continued volume/value divergence.
Samantha Phillips, partner at McKinsey & Co, said it was a “disappointing start to the golden quarter” but “potentially also a sign of shoppers holding out for Black Friday bargains and other festive promotions”.
For the three months to October, sales declined 1.1%, the ONS said.
Fuel sales fell by 2.0% in October which the ONS said may reflect increasing fuel prices, while food sales fell by 0.3% in the month from being unchanged in September.
Non-food stores sales volumes fell by 0.2% in October, following a 2.1% decline in September; retailers suggested that cost of living, reduced footfall and the wet weather in the second half of the month contributed to the fall, the ONS said.
Non-store retailing (predominantly online retailers) sales volumes rose by 0.8% in October following a fall of 2.4% in September.
The EY ITEM Club thinks the retail sector is in for a challenging time in the near term, as the impact of higher interest rates weighs increasingly on disposable spending.
That said, the biggest driver of October’s fall in retail volumes was fuel sales, which may bounce back as recent falls in oil prices feed through to prices at the pumps, it pointed out.
Gabriella Dickens at Pantheon Macroeconomics agreed that the fall could be short-lived.
“Looking ahead, we think a recovery in real incomes will cause retail sales to rebound,” she said.