Sales and confidence both fall as retail forecasts turn negative

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Rising inflation and falling consumer confidence are combining to put pressure on retailers, according to the latest data.

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In an interview with the Financial Times this morning, the Bank of England’s chief economist said that inflation is likely to hit 5% by early 2022.

His prediction followed recent comments from Bank of England governor Andrew Bailey that the Bank would have to make a decision about whether to put up interest rates at a meeting on 4 November.

This morning also saw data company GfK (Growth from Knowledge) release its latest Consumer Confidence Index, which showed a decrease of four points to -17 in October, a significant downturn since September.

Joe Staton, client strategy director at GfK, said: “After six-months of robust recovery in the first half of 2021, UK consumer confidence has taken a turn for the worse with all vital signs weakening.

“For two consecutive months five sub-measures have decreased and the headline score has dropped three months in a row.

“The sharpest concern is how consumers see the future economy with this collapsing ten points this month just as it did in September.

“Against a backdrop of cheerless domestic news – fuel and food shortages, surging inflation squeezing household budgets, the likelihood of interest rate rises impacting the cost of borrowing, and climbing Covid rates – it is not surprising that consumers are feeling down-in-the mouth about the chilly winter months ahead.

“Worryingly for British retailing in the run-up to Christmas, there’s a further decline in the intention to make major purchases.

“The financial mood of the nation has changed and consumers could do with some strong tonic to lift their spirits.”

To add to the gloom, retail sales fell for the fifth month in a row in September, with people spending less in shops despite Covid restrictions easing in the summer.

Sales dropped by 0.2% in September, following a 0.6% drop in August, according to the Office for National Statistics (ONS).

But food stores held up better than general retail, with the fall driven by customers buying fewer household goods and furniture.

In contrast, fuel sales rose by 2.9%, pushed up by a spike in demand.