UK consumers hunker down as fuel prices climb

LONDON (Reuters) – Consumers in Britain held off on much of their non-essential spending last month as rising prices for motor fuel compounded the broader hit from the high cost of living, according to data published on Tuesday.

The British Retail Consortium said total sales at chain stores grew by 2.7% compared to September 2022, weaker than a 4.1% increase in August.

“Sales growth in September slowed as the high cost of living continues to bear down on households,” BRC Chief Executive Helen Dickinson said, citing the recent increase in the price of petrol and diesel as well as a rise in housing costs.

Expensive items such as furniture and electricals performed particularly poorly while last month’s warm weather hit sales of autumnal clothing, Dickinson said.

Britain’s high inflation rate has slowed but at 6.7% in August it remains more than three times the Bank of England’s 2% target. The BoE paused its run of 14 back-to-back rate hikes last month but officials say it is too soon to declare victory.

The BRC’s like-for-like sales measure – which adjusts for changes in store space – slowed to show growth of 2.8% from 4.3% in August.

The sales figures published by the BRC are not adjusted for inflation and are likely to represent a drop in sales volumes last month from August.

Separate data from Barclays showed the pace of annual growth in the amount of money spent on credit and debit cards increased to 4.2% in September from August’s 2.8% rise, but the acceleration was largely due to higher outlays on motor fuel.

Growth in food sales also picked up but spending on restaurants and takeaways fell as many households focused on saving ahead of the Christmas period, Barclays said.

However, spending in bars grew more quickly, helped by the Rugby World Cup.

Seventy percent of consumers surveyed by Barclays said they were finding ways to reduce costs, up slightly from August.

Jack Meaning, chief UK economist at Barclays, said the warning signs of wariness among consumers was filtering through into their spending decisions.

“This suggests the outlook for consumers, and the businesses that rely on them, is weak, even as they finally see their disposable incomes rise faster than inflation,” Meaning said.

“It makes it hard to see anything but a relatively stagnant economy on the horizon.”

(Reporting by William Schomberg; editing by James Davey)