GBP drops as cost-of-living crisis hits UK retail sales
For many the high levels of interest rates continue to bite and the situation is worsening.
In a new warning sign for the economy, retail sales volumes fell unexpectedly by 0.3% month-on-month in October, following a revised 1.1% decline in September that was worse than first estimated. Year-on-year sales fell 2.7% where economists had forecast a drop of 1.5%.
The Office for National Statistics said, "retailers suggested the cost-of-living burden reduced footfall and the wet weather in the second half of the month contributed to the fall."
(Video summary)
Struggling UK economy: decline in retail sales & GBP's value
In the UK, people are finding it harder to afford their everyday expenses. This is causing a decrease in sales for retailers, as people are choosing to stay home rather than spend money.
The latest data shows that retail sales went down by 0.3% in October, which is a surprise to economists who were expecting an increase of 0.3%. Retailers say the reason for this decrease is because people are finding it too expensive to go out and shop, and also because of the rainy weather.
GBP/USD, GBP/EUR charts
In addition to the decline in sales, the value of the pound has also dropped against other currencies. This means that the pound is worth less compared to the US dollar and the euro.
You can see this drop in value on candlestick charts, which show the value of different currencies. The pound is currently at its lowest level against the euro since May 5, 2023.
On the other hand, the euro is slightly stronger than the pound, even though the eurozone is also facing economic difficulties. Inflation is still present, but there is poor economic growth in the region. Some experts even think that the eurozone might be in a recession this year. This situation makes it even more challenging for the European Central Bank (ECB) to balance inflation and weak growth.
So, in summary, the decline in retail sales and the drop in the value of the pound show that the UK economy is struggling. People are feeling the effects of the high cost of living, which is causing them to spend less money. The situation in the eurozone adds to the difficulties, as the ECB tries to manage inflation and weak growth at the same time.
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