UK retail sales unexpectedly fell in December as consumers grappled with rising inflation during the crucial Christmas shopping period.
The volume of retail sales in Great Britain fell by 1 percent between November and December, according to figures published by the Office for National Statistics on Friday.
The reading was well below the 0.5 percent rise predicted in a Reuters poll of economists.
Retail sales fell despite government payments to help households with rising living costs, delivered in mid-to-late November, which were expected to give “an extra boost to spending in the run-up to Christmas”, according to Paul Dales, UK’s chief economist at Capital Economics.
The figure is the second monthly drop in retail sales volumes, following a 0.5 percent drop in November, when Black Friday failed to produce a significant increase in sales.
Food sales fell 0.3 percent in December, compared to a 1 percent increase in the previous month. Heather Bovill, ONS deputy director for surveys and economic indicators, said: “After last month’s boost when shoppers loaded up early, food sales fell again in December.”
Sales volumes for non-food fell 2.1 percent over the month. Within the category, clothing stores’ sales volumes rose 1 percent, while home goods stores, such as furniture stores, rose 1.5 percent over the month.
But the figure was dragged down by a big drop in the “other” non-food subcategory, which fell 6.2 percent due to declines in general gift categories such as toys, cosmetics, jewelry and sporting goods, according to the ONS.
“December’s drop in sales suggests that consumers did not see Christmas or the World Cup as strong enough incentives to loosen the wallet,” says Aled Patchett, head of retail and consumer goods at Lloyds Bank.
Online shopping fell to 25.4 per cent, from 25.9 per cent in November, with some online retailers reporting being hit back by Royal Mail strikes last month.
Latest data from the ONS opinion poll, covering the period between December 21 and January 8, showed that 65 percent of adults are spending less on non-essentials as their living costs have increased.
The ONS findings are consistent with separate data by research firm GfK, released earlier on Friday, which showed UK consumer confidence remained below minus 40 for the ninth consecutive month in January, marking the longest period of pessimism in almost 50 years .
“With a renewed drop in consumer confidence in January”, weak retail sales were “very likely to continue as the wider economy slips into recession in 2023”, said Olivia Cross, assistant economist at Capital Economics.
Nevertheless, the ONS reported that the value of retail sales rose by 3.8 percent compared to December 2021, despite their volume being down 5.8 percent over the same period.
As prices rose to near-record highs, especially after Russia’s invasion of Ukraine, retailers’ turnover rose, but people were able to buy less with their money.
Consumer price inflation eased slightly to 10.5 percent last month, after hitting a 41-year high of 11.1 percent in October.
“With the UK forecast to enter recession this year, combined with energy bills remaining sky-high and savings starting to dry up for many households, retailers face a challenging year,” said Phil Monkhouse, head of sales at financial services firm Ebury.