- Monthly sales fall three times as much as expected
- Sales now barely above pre-Covid levels
- Consumer confidence at record lows
Consumer stocks were roiled heading into the weekend after the one-two combination of an overnight profit warning from US logistics giant FedEx (FDX:NYSE) and much worse than expected UK retail sales figures.
The retail sales report from the ONS (Office for National Statistics) showed sales by volume fell by 1.6% from July to August against estimates of a 0.5% drop.
HUNKERING DOWN
Sales by volume have been falling steadily since last summer after the lifting of restrictions on hospitality, but now they are falling due to the cost of living crisis.
All main sectors - food, non-food, online and even fuel - saw lower volumes in August than the previous month with non-food store sales down 2.8%, department store sales down 2.7%, online retail down 2.6% and fuel sales down 1.7% compared with July.
It is worth noting that the ONS will likely revises the data in a month or two as it collects more information, and the August figures relate to a period when it wasn’t clear who would be the new prime minister or what measures would be taken to stave off the looming hike in energy prices.
However, coming on the back of profit warnings already this month from ASOS (ASC), Gear4Music (G4M:AIM), Hilton Food Group (HFG), Ocado (OCDO) and Primark, owned by Associated British Foods (ABF), the report paints a bleak picture for consumer spending heading into the final quarter of the year.
Sales in volume terms last month were very slightly higher than their pre-Covid levels but 13.7% higher in value terms, which shows how much the price of goods has risen in the last two and a half years.
CRISIS OF CONFIDENCE
The latest IGD shopper confidence index showed a sharp drop in August to a new low, while the GfK consumer confidence index hit its lowest level since the survey began in 1974.
Most worrying, GfK’s ‘Personal Finance Situation over the next 12 months’ measure fell to -31 down 42 points on last year and the ‘Major Purchase Index’ fell to -38 down 35 points on a year ago.
‘These findings point to a sense of capitulation, of financial events moving far beyond the control of ordinary people’, said GfK’s client strategy director Joe Staton.
‘With headline after headline revealing record inflation eroding household buying power, the strain on the personal finances of many in the UK is alarming.
‘Just making ends meet has become a nightmare and the crisis of confidence will only worsen with the darkening days of autumn and the colder months of winter’, added Staton.
