Slowing retail sales were a factor as gross domestic product (GDP) fell by 0.2% in the third quarter of this year, compared to the previous quarter, official figures suggest. Shoppers appear to be buying fewer goods as their disposable incomes are hit by the rising cost of living. Retailers, in turn, appear to be cutting back on stock, according to the first Q3 GDP estimate from the UK Office for National Statistics (ONS).
The ONS today estimates that GDP fell by 0.2% between June and September, including 0.6% fall in September. The September fall in GDP is partly attributed to the extra bank holiday for the funeral of Queen Elizabeth II, while retail and manufacturing slowed throughout the quarter. GDP is now estimated to be 0.4% lower than it was in the final quarter before Covid-19 – October to December 2019. This is a first quarter of falling GDP this year – after GDP grew by 0.7% in the first quarter and by 0.2% in the second quarter. If GDP falls again in the current quarter of the year, the UK will technically be in a recession, something already flagged up as likely by the Bank of England in its Monetary Policy Report for August 2022.
Services sector GDP was flat in the third quarter of the year, and fell by 0.6% in September. Retail sales volumes fell by 1.9% in the three months to September 2022, and wholesale trade fell by 1.4%. This, says the ONS, “likely reflects pressure from cost of living rises caused by energy price rises affecting household disposable incomes”.
Consumer-facing services fell by 0.8% during the quarter – slowing from a 1.2% increase in the previous quarter. But growth in areas including education, finance and insurance offset this decline, with the result that overall services GDP was flat.
Inventories fell by £11.3bn in the third quarter, especially in the retail and manufacturing industries. “Anecdotal evidence shows that the retail sector showed reductions in stock because of lower demand resulting from cost of living pressures on disposable incomes,” says today’s ONS report. “For manufacturing industries, these were affected by lack of availability in raw materials.”
