TIMES.KY

Cayman Islands, Caribbeanand International News
Thursday, Jan 26, 2023

Retail sales plunge as consumer confidence 'nears financial crisis all-time low'

Retail sales plunge as consumer confidence 'nears financial crisis all-time low'

The data, coupled with a closely-watched reading of consumer confidence, prompts a dive in the value of the pound and places the Bank of England in a tricky position as it decides whether to hike interest rates for a fourth consecutive time.

The pound has fallen sharply after several pieces of data raised fears of a slump ahead for UK economic growth, driven by surging inflation.

The market mood turned ugly when the Office for National Statistics (ONS) reported a 1.4% monthly decline in retail sales in March, led by a big drop in demand for online purchases.

There was little sign for optimism among retailers, except for the owners of garden centres and DIY shops, though the data did suggest that COVID-weary consumers shifted discretionary spending towards hospitality and attractions instead as the weather improved.

Economists had expected a 0.3% decline in sales month-on-month - and sterling dived by more than 1.5 cents against the dollar, to an 18-month low of $1.28, as investors fretted over the prospects for economic growth ahead.


The UK currency was also more than one cent off against the euro.

Adding to the gloom was data from a survey of purchasing managers showing the slowest rise in private sector output for three months in April - with record inflationary pressures and war in Ukraine hitting demand.

A closely-watched measure of consumer confidence, also covering April, delivered its second-lowest reading since records began nearly 50 years ago.

It suggests that consumer spending, the biggest contributor to the UK's GDP, is at risk of being choked off as families fret over rising bills for everyday goods and services.

ONS Director of Economic Statistics Darren Morgan said of the retails sales data: "Retail sales fell back notably in March with rises in the cost of living hitting consumers' spending.

"Online sales were hit particularly hard due to lower levels of discretionary spending.

"Fuel sales also fell substantially, with evidence suggesting some people reduced non-essential journeys, following record high petrol prices, while food sales continued to fall, dropping for the fifth consecutive month."

It all makes for worrying reading at the Bank of England.

The GfK consumer confidence index, derived from a survey, came in at -38 - worse than economists had expected and just shy of the all-time low seen in 2008 as the global financial crisis was gathering pace.

The responses were registered at a time when we learned that inflation had hit a 30-year high of 7%.

It is forecast by the Office for Budget Responsibility to climb above 9% after the unprecedented surge in the energy price cap in April - and rises in other household bills such as mobile, water and broadband are reflected in the calculations.

The price cap is currently expected to rise further - by up to £500 - in October when the additional effects of Russia's invasion of Ukraine are included, while the retail sector expects price rises to intensify throughout 2022.

GfK reported a sharp decrease in consumers' intentions to make major purchases.

All the data will be taken into account by rate-setters at the Bank, who have signalled more caution on rising rates ahead after lifting Bank rate to 0.75% at their last meeting.

They will be anxious not to choke off economic growth through rising interest rates, which are intended to stop rising inflation expectations, such as wage hikes, rather than rising prices as the inflation has been caused by factors outside their control including energy and food costs.

Inflation, while not demand-led, is nevertheless proving more sticky and persistent than policymakers had expected and financial markets still forecast a 0.25% rate hike at the next meeting of the monetary policy committee in two weeks' time.

That is because the inflationary fires have been stoked by Russia's war against Ukraine.

However, Bank governor Andrew Bailey admitted on Thursday that policymakers were walking a tight line between tackling inflation and avoiding recession.

That is because raising borrowing costs to help ease inflationary pressures could prove counterproductive with millions of mortgage holders - those on tracker or standard variable deals - already paying more.

Russ Mould, investment director at AJ Bell, said of the situation: "The ONS' retail sales data is a wake-up call that life is going to be tough for shops - virtual or physical - in the coming months.

"Once those vastly increased energy bills hit the doormat and households take time to reassess their financial situation, there is every chance that retail sales could get even worse," he wrote.

Newsletter

Related Articles

TIMES.KY
Close
0:00
0:00
Prince Andrew and Virginia Giuffre Photo Is Fake: Ghislaine Maxwell
Opinion | Israel’s Supreme Court Claims a Veto on Democracy
Moonwalker Buzz Aldrin Gets Married On His 93rd Birthday
Who’s Threatening Israeli Democracy?
Federal Reserve Probes Goldman’s Consumer Business
China's first population drop in six decades
Microsoft is finalising plans to become the latest technology giant to reduce its workforce during a global economic slowdown
China's foreign ministry branch in Hong Kong urges British gov't to stop the biased and double standards Hong Kong report
Tesla slashes prices globally by as much as 20 percent
1.4 Million Copies Of Prince Harry's Memoir 'Spare' Sold On 1st Day In UK
After Failing To Pay Office Rent, Twitter May Sell User Names
Lisa Marie Presley, singer and daughter of Elvis, dies aged 54
FIFA president questioned by prosecutors
Britain's Sunak breaks silence and admits using private healthcare
Hype and backlash as Harry's memoir goes on sale. Unnamed royal source says prince 'kidnapped by cult of psychotherapy and Meghan'
Saudi Arabia set to overtake India as fastest-growing major economy this year 
Google and Facebook’s dominance in digital ads challenged by rapid ascent of Amazon and TikTok
FTX fraud investigators are digging deeper into Sam Bankman-Fried's inner circle – and reportedly have ex-engineer Nishad Singh in their sights
TikTok CEO Plans to Meet European Union Regulators
UK chaos: Hong Kong emigrants duped by false prospectus
France has banned the online sale of paracetamol until February, citing ongoing supply issues
Japan reportedly to give families 1 million yen per child to move out of Tokyo
Will Canada ever become a real democracy?
Hong Kong property brokerages slash payrolls in choppy market
U.S. Moves to Seize Robinhood Shares, Silvergate Accounts Tied to FTX
Effect of EU sanctions on Moscow is ‘less than zero’ – Belgian MEP
Coinbase to Pay $100 Million in Settlement With New York Regulator
FTX assets worth $3.5bn held by Bahamas securities regulator
A Republican congressman-elect is under investigation in New York after he admitted he lied about his education and work experience.
Brazilian football legend Pele, arguably the greatest player ever, has died at the age of 82.
Hong Kong to scrap almost all its Covid rules
EU calls screening of travellers from China unjustified
US imposes Covid testing for visitors from China
Ukraine President Volodymyr Zelenskyy Addresses Joint Session of Congress - FULL SPEECH
If a country is denied the right to independence by another, it is not in a union. It is in a dictatorship.
Where is Rishi? Chancellor Jeremy Hunt's excuses about the UK's economic challenges just don't make sense
Former FTX CEO Bankman-Fried finally arrested in Bahamas after U.S. files charges
Corruption works: House Financial Services Chair Waters doesn't plan to subpoena her donor, Sam Bankman-Fried, to testify at hearing on FTX collapse
Ronaldo's new contract...
Prince William's godmother resigns honorary royal role after exposing her/their racism
British PM Rishi Sunak pledges further action on strikes to 'protect lives'
Tax fraud verdict again exposes illusion of Trump the master businessman
Tax fraud verdict again exposes illusion of Trump the master businessman.
Double standards: UK lawmakers attack EU chief over Ireland claims
Yellen hints at ‘national security’ probe into Twitter purchase
Elon Musk reinstates Donald Trump's Twitter account.
George W. Bush and Barack Obama will hold back-to-back disinformation conferences
Mission Improbable: Tom Cruise & Queen Elizabeth
Miss Argentina and Miss Puerto Rico are not single anymore
Matt Hancock is back to the jungle
×