UK retail sales post strongest rise since June, but fuel costs and Budget caution cloud outlook

Data on UK retail spending present a conflicting picture for interest rates and the pound. While headline figures show stronger activity, much of the improvement stems from increased fuel prices, reflecting energy expenses rather than genuine demand. This reinforces the idea that the oil shock is acting as a burden on households, potentially dampening discretionary spending and sentiment over time. Stagnant non-food sales and the lowest confidence reading since April suggest the numbers should not be interpreted as a revival in underlying consumer strength. Any decline in oil prices following reduced tensions in the Middle East could provide relief to households, while the Budget remains a near-term source of uncertainty for both spending and sterling.

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October saw higher spending by Britons, though largely on food and fuel, while economic sentiment slipped to its most downbeat since April.

Summary:

• BRC total retail sales increased 1.5% year-on-year in October, compared with 1.3% in September, marking the best performance since June; like-for-like sales grew 1.1%
• Food sales climbed 3.2%, while non-food sales were unchanged, with some consumers deferring purchases for Black Friday deals
• Rising household expenses and uncertainty ahead of the Budget limited growth
• Barclays card spending rose 2.3%, the largest gain since July 2025, with essential outlays up 3.1% driven by a 22.7% surge in fuel spending
• Barclays' consumer confidence indicator fell to its weakest level since April

UK retail sales posted a modest gain in October, according to the British Retail Consortium. Higher petrol prices, pre-Budget caution and shoppers waiting for Black Friday promotions tempered spending, even as a separate Barclays survey of card transactions recorded the strongest growth in over a year.

The BRC reported total retail sales advanced 1.5% from a year earlier, accelerating from September's 1.3% and the strongest pace since June. Like-for-like sales, excluding changes in store area, increased 1.1% following a prior 1.0% rise. Food sales rose 3.2%, but non-food sales stagnated, a division suggesting price-driven grocery purchases rather than a broad upturn in discretionary outlays. The BRC observed that sales of cupboard essentials rose slightly after the government advised households to stock up for emergencies.

Accompanying analysis described the overall performance as subdued, attributing it to higher household costs, caution before the Budget and consumers delaying purchases for Black Friday deals.

Barclays' figures, covering card transactions across a broader set of goods and services, showed a stronger picture. Consumer spending climbed 2.3% year-on-year in October, rising from 2.0% in September and the biggest increase since July 2025. Essential outlays grew 3.1%, powered by a 22.7% leap in fuel spending, while non-essential spending advanced 1.9%. Entertainment recorded its strongest month since September 2024 as tickets for the Glastonbury music festival went on sale.

The fuel data illustrate how elevated energy costs are boosting headline spending. Much of the increase comes from households paying more at the pump rather than consuming more, which constrains budgets for other items.

That pressure is reflected in sentiment. Barclays reported that consumer confidence in the UK economy was at its weakest since April, indicating households remain cautious despite the steadier spending data. Non-food sales were unchanged, and Black Friday is expected to pull some purchases into late November. Consequently, October's figures offer an ambiguous reading on UK consumer demand as the critical holiday shopping season approaches.