Industry data published today suggests many retailers had a disappointing Christmas as consumers held back from making big purchases during the period.
The BRC-KPMG Retail Sales Monitor shows growth of just 1.7% in December, down from 2.7% the previous month and below the 12-month average of 3.6%. The increase also lagged behind the 3.9% rate of inflation recorded in November, suggesting that volumes fell.
Food sales increased 6.8% over the three months to December, but this was below the 12-month average growth of 8.1%. For the month of December, BRC said that food was in growth year-on-year.
However, non-food sales decreased 1.5% during the quarter – steeper than the 12-month average decline of 0.1%. Non-food also declined during December.
The BRC noted that post-Christmas sales were unsuccessful in enticing spending in areas such as furniture and homeware, with cash-strapped households remaining cautious about making larger purchases.
“The festive period failed to make amends for a challenging year of sluggish retail sales growth, as weak consumer confidence continued to hold back spending,” said Helen Dickinson, Chief Executive of the British Retail Consortium (BRC)
“2024 looks to be another challenging year for retailers and their customers, and spending will continue to be constrained by high living costs. Retailers will also have to juggle various cost pressures, including the rise to business rates this April. This will be compounded by other emerging issues, such as the disruption to shipments from the Far East via the Red Sea. Political parties must consider this backdrop when they set out their plans for retail in manifestos so they can help support the industry to grow, invest, and serve customers.”
Separate payment card data released today by Barclays supported the BRC figures, with spending up 2.3% year-on-year in December but below both the rate of inflation and the 2.9% growth recorded in November.
Barclays data, which covers nearly half of the UK’s credit and debit card transactions, showed that spending on electronics, furniture and clothing all fell last month by 5.1%, 4.7% and 2% respectively. Restaurants also recorded a fall (-8.8%), but bars, pubs and clubs had a better month with spending up 7.9%.
Meanwhile, the deceleration in food price inflation meant supermarket shopping saw its lowest uplift (+2.8%) since September 2022. Barclays noted that this could also be due to shoppers already having stocked up on festive food and drink in November, taking advantage of early supermarket discounts and deals.
The travel sector had a strong month, with spending on airline tickets up 20.2%, while the entertainment sector was another bright spot, with spending up 12.3%.
Karen Johnson, Head of Retail at Barclays, commented: “Hospitality and leisure businesses will be encouraged by December’s strong growth, particularly in the entertainment category, which saw growing demand for live shows, new films and TV series.
“Meanwhile, grocery and retail spending didn’t see as much of an increase as we might have expected during the height of the festive season. This is likely due to many retailers and supermarkets starting discounts and promotional activity earlier than usual, meaning that many Brits had been making the most of these deals and completed most of their Christmas shopping by December.
“While the upcoming energy price cap is weighing on Brits’ minds, the falling rate of inflation offers a glimmer of positivity, and it’s encouraging to see the nation’s optimism increase slightly as we head into a new year.”
Jack Meaning, Chief UK Economist at Barclays, added: “We saw inflation fall significantly at the end of 2023, and we expect it to fall further in the opening months of 2024. This puts more spending power in the pockets of UK consumers and should help support them to continue to spend, even against the tough backdrop of weak economic growth.
“It’s also encouraging to see tentative signs of an improving mortgage market; approvals have begun to rise and mortgage rates are continuing to fall. However, it’s worth remembering that many people this year will still be dropping off of fixed-term mortgages onto new deals with higher rates than they had previously, eating away at some of their newly found spending power.”
NAM Implications:
- i.e. ‘Christmas not as good as anticipated’.
- Swallow hard and get on with 2024 in the New Norm.
- But the basics still apply:
- Deliver more than it says on the tin, always…
- …and no short cuts.
