Unmasking the Cost of Living Crisis: Navigating High Inflation Rates

The UK is currently grappling with a Cost of Living Crisis as inflation rates remain a cause for concern among its citizens. Despite a slight dip in the inflation rate, British consumers are apprehensive about the increasing Cost of Living, leading to a substantial reduction in their purchasing power. This prompts the question: why has the purchasing power of UK consumers declined? Furthermore, it is crucial to examine the recent consumer behaviour trends and significant purchase patterns in the past months. Understanding these trends can shed light on the implications and potential consequences of the ongoing Cost of Living Crisis and inflation rate concerns for UK retail sales.

A sharp drop in consumption in the UK

In recent months, the purchasing power of UK consumers has experienced a decline. A survey’s findings reveal a significant decrease in the sentiment of British consumers in October, compared to the early stages of the COVID-19 pandemic approximately three and a half years ago. Market research firm GfK reported a decrease of 9 points, bringing the figure to a concerning minus 30 points. Joe Staton, Client Strategy Director at GfK, emphasized that this sharp decline underscores the acute pressures many consumers are facing due to the Cost of Living Crisis and inflation rate, and the challenge of making ends meet with limited financial resources.

Cost of Living Crisis and inflation rate

UK consumer prices increased by 6.7% in September compared to last year. Thus, the inflation rate is much lower than the 41-year high of 11.1 per cent in October 2022. Most economists expect inflation to drop sharply this month. However, the cost of living is still likely to be about 17% higher than two years ago. The purchasing power of UK consumers is decreasing daily under the influence of the poor performance of conservative governments.

Reducing the willingness of households to buy

Consumer sentiment towards the economy is often negative. Staton said: “The fierce headwinds of meeting the accelerating costs of heating our homes, filling our petrol tanks, coping with surging mortgage and rental rates, a slowing jobs market, and now the uncertainties posed by conflict in the Middle East, are all contributing to this growing unease in the face of the Cost of Living Crisis and inflation rate.

Decrease in consumption contrary to forecasts

British retail sales fell more than expected in September, according to the survey. The figure fell by 0.9% after a 0.4% rise in August, according to the ONS. Economists polled by Reuters had expected only a 0.2 per cent decline. Grant Fitzner, chief economist at the ONS, said: “It was a poor month for clothing stores as the warm autumnal conditions reduced sales of colder weather gear”, with clothing and department stores recording a 1.6% decline in sales in September.”

Decline in UK retail sales

UK retail sales fell in September as the high cost of living continued to put pressure on household budgets, reports said. UK retail sales fell in September as the high cost of living continues to put pressure on household budgets, according to the latest sales monitoring report from the BRC-KPMG Retail Sales Monitor, released in recent days.

Poor sales at UK retailers

UK stores and retailers reported weak sales last month as cash-strapped consumers avoided big spending (such as housing and cars) and bought winter clothes due to hot weather, the survey showed. The weather was delayed at this time of the year. Consumer behaviour and major purchases indicate a sharp decrease in the purchase of essential and non-essential items by households.

Retailers sell low on large items

The figures also show that although the amount of money Britons spent on shopping rose 2.7% year-on-year in September, spending was down 4.1% compared to August. Helen Dickinson, Chief Executive of the British Retail Consortium, said in the report: “Sales growth in September slowed as the high cost of living continues to bear down on households. Big ticket items such as furniture performed poorly as consumers limited spending in the face of higher housing, rental and fuel costs.” 

Consecutive increase in unemployment in the UK

According to this report, September is the second month of weak sales of goods since the beginning of this year, and the sales figures are much lower than the inflation rate. The cost of living crisis in the UK has dramatically reduced consumption. At the same time, the fear of economic recession has increased in this country because the successive increase in interest rates has had its effect. The PMI, a gauge that reflects the overall health of the economy, indicated contraction in August and September, and unemployment has been rising for three straight months.

The premature death of the British due to the cost of living crisis

The purchasing power of UK consumers is an expression of the general state of the economy of this country. The Independent reported that some deprived areas of Britain could see nearly 70 premature deaths per 100,000 people a year due to the continuing cost of living crisis. The study found that the proportion of people dying prematurely (under age 75) could increase by about 6.5 per cent or 30 additional deaths per 100,000 people per year.

Increase in deaths due to poverty

According to the researchers, some of the most deprived families may see rates of premature death that are four times higher than those of more affluent families. The researchers also found that families in poorer areas are likely to fare worse, even with government support. This study shows that inflation can increase mortality by 23% in the most impoverished and 5% in deprived areas.

Remarkable decline in English companies

Economists have warned of the risk of a deepening recession after new figures showed British firms suffered an unexpectedly sharp fall in August, The Independent reported. The chief economist of the Bank of England emphasizes the need to maintain the country’s monetary policy firmly in the shadow of inflation. Huw Pill stressed that Britons must accept a reduction in their purchasing power in the face of a historic cost of living crisis to avoid fueling inflation.

The futility of British efforts to maintain their standard of living

Stating that the inflation is caused by shocks outside the UK, including the Covid-19 epidemic and the war in Ukraine, Pill said: “If the cost of what you’re buying has gone up compared to what you’re selling, you’re going to be worse off.” According to Pill, somehow, in the UK, someone needs to accept that they’re worse off and stop trying to maintain their real spending power by bidding up prices, whether higher wages or passing the energy costs through on to customers.

Successive increase in interest rate to control inflation

The British economist also stressed that monetary policy in the UK should remain tight enough to contain inflation, although very high rates could significantly damage the economy. These statements are at the height of the cost of living crisis. The Bank of England has raised interest rates 11 times since late 2021 to control consumer prices.

The UK has the highest inflation of the major economies.

The UK has the highest inflation rate in 2023 among the world’s major economies. According to forecasts from the Organization for Economic Co-operation and Development (OECD), Britain’s inflation problem is expanding compared to most of its peers. The overall UK inflation rate in 2023 was set at an average of 7.2%, higher than the OECD’s previous forecast of 6.9% in June.

Challenges in the UK economy and Rishi Sunak’s promises

Market volatility and consumer confidence show that Rishi Sunak’s government has not succeeded in the economy. Rising food prices have contributed to the biggest squeeze on living standards in the UK since record-keeping began in the 1950s. British Prime Minister Rishi Sunak’s central economic promise ahead of a possible 2024 election was to halve headline inflation by 2023 due to continued increases in food inflation, outpacing the broader economy-wide inflation rate and putting pressure on household budgets that Already exacerbated by higher taxes and mortgage rates, it has been undermined.