According to the latest data on high street and online activity, retailers in Britain are facing a deepening slump in consumer spending, leading them to cut jobs and reduce investment. The Confederation of British Industry (CBI) reported that its barometer of retail activity fell for the fourth consecutive month in August, reaching its lowest level since March 2021. Retailers anticipate continued poor trading conditions in the coming months and are scaling back on orders from suppliers. Martin Sartorius, a principal economist at the CBI, stated that August witnessed the most significant decline in retail sales in over two years, adding to a disappointing summer for retailers. With rising interest rates and weak demand, retailers expect to decrease investment in the next year and experience a further decline in employment.
While retail sales account for less than half of total consumer spending, the steady decline observed in the CBI’s distributive trades survey is seen as evidence of the impact of the 14 interest rate hikes by the Bank of England since December 2021. Additionally, poor summer weather has had a negative effect on sectors such as clothing and footwear, as retailers struggled to sell their summer stocks.
Despite reports of retailers offering discounts to attract hesitant consumers, the CBI found only modest evidence of price reductions. The survey revealed that in August, a majority of retailers reported that prices had risen, although slightly lower compared to May and February.
In light of these challenges, Susannah Streeter, the head of money and markets at Hargreaves Lansdown, emphasized that shoppers have become increasingly cautious, resulting in a disappointing August for the high street. The squeeze on household budgets and the adverse impact of higher interest rates have contributed to this cautious consumer mindset.
To support retailers, Sartorius proposed that Chancellor Jeremy Hunt utilize the autumn statement to establish a stable and investment-focused tax regime.
Please note that the link provided suggests a potential shift in consumer behavior towards experiential spending and offers additional insights into UK consumer spend.
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