The pound fell to a new 37-year low against the US dollar on Friday after new figures showed a big drop in retail sales for August.
Retail sales volumes fell by 1.6% last month, continuing a downward trend since summer 2021, the Office for National Statistics (ONS) said.
Consumers reined in their spending by much more than economists had forecast as high inflation hit demand for both essential and non-essential goods.
Food store sales volumes fell by 0.8% in August, leaving them 1.4% below pre-pandemic levels in February 2020, while non-food stores sales volumes fell by 1.9% over the month.
Automotive fuel sales volumes dropped by 1.7%, and online sales volumes were down 2.6%.
In response to the data, sterling declined more than 1% against the dollar to $1.13, its lowest since 1985.
Danni Hewson, AJ Bell financial analyst, said that people were “clearly thinking hard about what they spend their money on”.
“It’s just not stretching as far as it used to, and essentials have to come first. But even essentials are costing more and with the spectre of unmanageable fuel bills looming large people did the only thing they could, cut back,” she added.
