Whilst some recent trading updates from leading retailers suggested that Christmas spending was relatively robust, official data for the sector suggests cost-conscious shoppers made cutbacks to cope with rising inflation.
Figures from the Office for National Statistics (ONS) show the volume of retail sales in Britain were down 1% in December on a month-on-month basis, following a fall of 0.5% in November. A Reuters poll of economists had been predicting a 0.5% rise over the key festive trading period.
On a year-on-year basis, sales volumes were down by 5.8% in December, the biggest fall for that month since records going back to 1997 and the ninth month in a row that they fell in annual terms.
Food sales volumes slipped 0.3% in December, down from a 1% rise in the previous month, suggesting shoppers had stocked up early.
Non-food sales volumes fell by 2.1% over the month as consumers cut back on spending due to increased prices and affordability concerns. Whilst clothing (+1%) and household goods (+1.5%) saw volumes rise, the sub-sector of other non-food stores saw a fall of 6.2% because of declines in stores selling cosmetics, sports equipment, games, toys, and jewellery stores.
Meanwhile, the proportion of online shopping fell to 25.4%, from 25.9% in November, with some retailers reporting that they were impacted by strikes at Royal Mail.
Olivia Cross from consultancy Capital Economics stated that the surprise fall in overall retail sales suggested that some of the resilience seen in the economy in late 2022 petered out in December.
“What’s more, we think the bulk of the drag on activity from high inflation and rising interest rates has yet to be felt,” she said.
Phil Monkhouse, head of sales at financial services firm Ebury, added: “With the UK forecast to enter recession this year, combined with energy bills remaining sky-high and savings starting to run low for many households, retailers face a challenging year.”
Bank of England Governor Andrew Bailey yesterday sounded a more hopeful note, saying recent falls in inflation were “the beginning of a sign that a corner has been turned.”
Nonetheless, interest rates are expected to increase for the tenth time in a row at the beginning of February.
Helen Dickinson, Chief Executive of the British Retail Consortium, said retailers and customers still faced cost pressures but the situation was likely improve in the second half of 2023.
NAM Implications:
- Key message is that only volume counts…
- …in concluding that consumers bought sensibly at Christmas…
- …with more pain to come.
- In which case, any growth will be at the expense of rivals…
- Based on identifying, communicating credibly relative competitive edge that matters.
- Meanwhile, worth comparing your sales with these stats to ensure you achieved your fair share of available business…
