British retail sales fell much more than expected in August, another sign that the economy is sliding into recession as the cost-of-living crisis cuts into household spending.

According to the Office of National Statistics, retail sales in August fell 1.6 percent month-over-month, the biggest drop since December 2021 and worse than all forecasts in a Reuters poll of economists indicating a 0.5 percent drop.

This data is likely to increase fears about the strength of demand in the British economy. Amid the data, the pound fell further against the dollar 1.14.

All major retail sectors - grocery stores, non-food stores, non-store retailing and fuel - fell for the month for the first time since July 2021.

The period of mourning following Queen Elizabeth's death poses another challenge for retailers, as businesses are set to close Monday in connection with the queen's funeral.

The gloomy atmosphere in the U.K. this week and news of slow economic growth will add to the sense of unease among retailers as the weather turns colder.

Although inflation dipped below 10 percent last month, households are still struggling with the biggest price increases since the early 1980s.