UK Retail Sales Fall 0.4% as Households Tighten Spending

British retail sales fell 0.4% month on month in September, four times the 0.1% drop economists had expected, according to the Office for National Statistics (ONS). The figure lands one week before the chancellor, John Healey, delivers his budget — and it lands badly.

The decline was broad-based, but the details matter for anyone tracking consumer demand. Strip out fuel and the picture gets worse: sales excluding automotive fuel fell 0.7% in September, against a City forecast of just a 0.1% decline.

Where the pain concentrated

Non-store retailing — predominantly online sales — took the biggest hit, falling 2.2% month on month. Textile, clothing and footwear stores dropped 0.9%. Household goods retailers saw a 0.5% slump. Supermarkets dipped 0.4%, partly on weak sales of clothing ranges blamed on the weather.

An unseasonably warm September hurt online sales of autumn and winter wear specifically, the ONS said. The temperature, in effect, delayed a whole season of spending.

Department stores were the only sector apart from fuel to record growth, with volumes up 0.2%.

The fuel anomaly

Here's the counterintuitive number: motor fuel volumes soared 2.2% month on month even as pump prices hit record highs. Fuel sales volumes have now returned to levels last seen before the start of the conflict in the Middle East.

In value terms, the 6.1% increase in fuel sales was the largest month-on-month rise since the 10.9% recorded in March — the month immediately after the start of the US-Iran conflict. Drivers bought more fuel while paying more for it. That's not a sign of consumer strength; it's spending consumers can't easily defer.

What does this change for the quarter?

Two things. First, the context: UK consumer confidence has fallen at the fastest rate since the Covid pandemic, according to figures cited alongside the retail data. Second, the timing — the festive quarter, which retailers depend on, starts now.

Paul Dales, chief UK economist at Capital Economics, said: "October's sharp fall in consumer confidence and the dip in retail sales volumes in September show that times are getting tougher for households just as the all-important festive period for retailers is just around the corner."

His firm's read is blunt. "This supports our view that both real consumer spending and real GDP will grind to a halt in [the final quarter of this year and the first quarter of next]," Dales said. He added a political wrinkle: "And this fall in consumer confidence is also the kind of thing that makes the prime minister less likely to call an early election soon."

The quarter still looks decent — barely

September's fall follows a bumper August. The ONS revised August's growth up from 0.5% to 0.7%, which helped push sales up 0.7% over the three months to the end of September compared with the previous quarter.

Hannah Finselbach, a senior statistician at the ONS, said: "Retail sales grew in the latest quarter with growth led by motor fuel, which, despite recent price increases at the pump, have now returned to monthly sales levels last seen before the start of the conflict in the Middle East."

She added: "Food and drink sales also contributed to growth in the quarter, partly helped by the warm weather and the World Cup, although they fell back slightly in September."

So the quarterly headline holds up on fuel and a summer boost that has already faded. The monthly trend — down across almost every sector, with confidence collapsing — points the other way. Healey now writes a budget against a consumer base that has already stopped spending, with Capital Economics forecasting flat real consumer spending and GDP through the first quarter of next year.