What's going on?
Data out on Friday showed that UK retail sales fell more than expected in September.
What does this mean?
It’s blindingly obvious that inflation in the UK’s through the roof, but the latest data took even economists by surprise: British retail sales fell 1.4% in September compared to August, almost three times the expected 0.5%. Now, a drop that sharp normally has a couple of causes, and the most obvious is that folk are simply cutting back on expenses as prices rise. In fact, 41% of all motorists were avoiding non-essential journeys because of high fuel prices, and online shopping and food store sales were down 3% and almost 2% respectively in September. Store closures during the late Queen’s funeral played a role in those numbers too, but after August’s drop, these dips are starting to look like a trend. All in, sales volumes are languishing a whole 10% below their pre-pandemic rate.
Why should I care?
For markets: Bad news for Brits.
The pound fell in the wake of the news, and economists said the data makes it more likely that the economy shrank last quarter. On top of that, separate data showed that UK consumer confidence – a measure of how Brits view their finances and the economy – continued to hover near 50-year lows at the start of this month. What’s more, all that data came in before the prime minister resigned last week, a move that’ll bring uncertainty and nervousness to fever pitch.
The bigger picture: In the hole.
Whoever replaces the outgoing prime minister will inherit an unenviable job, especially when it comes to getting government finances in check. After all, the government deficit – that’s the difference between what it spends and what it brings in from things like taxes – was much higher than expected last month. The country’s been piling up debt to plug the gap, but with interest rates on the up, that solution’s looking pretty unsustainable.