Pound falls as weak retail sales raise fears UK economy is in recession
The pound sank to a fresh 37-year low against the dollar on Friday after weaker than expected retail sales raised fears that the British economy is already in recession.
Sterling fell by more than 1% against the currency to $1.1351, its lowest since 1985, partly reflecting broader dollar strength as well as specific concerns about the outlook for Britain. The pound also hit a 17-month low against the euro, with one euro worth 87.66p.
It came as the latest official data showed cash-strapped consumers cut back on spending by more than expected in August, when retail sales volumes in Great Britain fell by 1.6%. Economists had predicted a more modest fall of 0.5%.
The sharp decline in sales came after an upwardly revised 0.4% increase in July that appears to be a temporary bounceback after the Queen’s platinum jubilee celebrations in June.
The fall in sales last month was broad based, with petrol stations, supermarkets, clothing and furniture stores all experiencing a drop, the Office for National Statistics said.
The last time this happened was in July 2021, when all legal Covid restrictions on hospitality were lifted and people headed out to bars and restaurants.
The ONS said “rising prices and cost of living” were hitting retail sales in Great Britain, and economists warned the signs were there of an economy already in recession.
Olivia Cross, an economist at the consultancy Capital Economics, said that while she expected the UK recession would be shorter and milder after the government’s £150bn energy price freeze plan, all the indicators showed an economic contraction had already started.
She said: “The 1.6% drop in retail sales volumes in August supports our view that the economy is already in recession. Retail sales will
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