UK retail sales fall 0.4% in September as consumer confidence hits six-month low

British retail sales volumes declined more than anticipated in September, with unusually mild weather reducing clothing purchases, according to the Office for National Statistics. Consumer confidence plummeted to a six-month low in October, signaling mounting pressure on households ahead of the upcoming Budget. Retail sales volumes dropped 0.4% month-on-month, contrasting economists' expectation of a 0.1% decline, following a revised 0.7% increase in August.

The August rise had been revised up from an initial estimate of 0.5%. Clothing store sales fell 0.9% due to warm weather deterring purchases of autumn and winter items, and supermarket sales also decreased by 0.4%. However, automotive fuel sales rose 2.2%, partially offsetting the decline as households prepared for further price hikes.

Despite the monthly contraction, retail sales volumes increased by 0.7% in the third quarter compared to the prior three months. Consumer confidence dropped to -24 in October from -13 in September, marking the lowest level in six months. Rising fuel and utility bills, increased borrowing costs, and concerns over potential tax hikes in the Budget have negatively impacted household sentiment.

Analysts predict further weakness in retail sales, with annual growth potentially falling from 0.8% in September to well below zero. The decline in confidence raises the likelihood of Prime Minister Keir Starmer avoiding an early election.