British retail sales unexpectedly fell in December, as consumers dealt with rising inflation during the crucial Christmas shopping period.
The volume of retail sales in Great Britain fell by 1 per cent between November and December, according to figures published by the Office for National Statistics on Friday.
The reading came in well below expectations of 0.5 percent in a Reuters poll of economists.
Retail sales fell despite government payments to help families raise the cost of living, delivered in mid-to-late November, which was expected to “give an extra boost to spending in the run-up to Christmas,” according to Paul Dales, UK chief economist at Capital Economics.
The figure is the second monthly decline in retail sales volumes, after a 0.5 percent decline in November, when Black Friday failed to generate a significant jump in sales.
Food sales volumes fell 0.3 percent in December, easing from a 1 percent rise in the previous month. “After a boost last month with shoppers stocking up early, food sales fell again in December,” said Heather Bofill, NBS deputy director of surveys and economic indicators.
Non-food sales volumes decreased by 2.1 percent during the month. Within this category, sales volumes for clothing stores increased by 1 percent, while home goods stores, such as furniture stores, increased by 1.5 percent during the month.
But the number was held back by a significant drop in the “other” non-food subcategory, which fell 6.2 percent due to declines in common gift categories such as toys, cosmetics, jewelry and sporting equipment, according to the Office for National Statistics.
“The drop in sales in December suggests that consumers did not see Christmas or the World Cup as strong enough incentives to ease restrictions,” said 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, as some online retailers reported being set back by the Royal Mail strikes last month.
The latest data from the Office for National Statistics’ Public Opinion Survey, covering the period between December 21 and January 8, showed that 65 percent of adults are spending less on non-essential things as their cost of living increases.
The ONS findings are in line with separate data from research firm GfK, released earlier on Friday, which showed UK consumer confidence remained below -40 for the ninth consecutive month in January, marking the longest period of pessimism in nearly From 50 years old.
“With a renewed drop in consumer confidence in January,” said Olivia Cross, associate economist at Capital Economics, “weak retail sales are likely to continue as the broader economy slides into recession in 2023.
However, the Office for National Statistics reported that the value of retail sales increased by 3.8 percent compared to December 2021, although their volume decreased by 5.8 percent in the same period.
With prices rising to near record levels, particularly in the aftermath of the Russian invasion of Ukraine, retailers’ turnover has increased but people can 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 expected to enter recession this year, combined with energy bills still very high, and savings starting to fall for many households, retailers face a challenging year,” said Phil Moncus, head of sales at financial services firm Ibery.