UK Retail Sales Disappoint as Shoppers Hold Back in November

Retail sales volumes across the United Kingdom recorded an unexpected contraction of 0.1 percent in November, according to data released by the Office for National Statistics. The figures defied City economists’ expectations of 0.4 percent growth, highlighting cautious consumer spending in the period leading up to the budget.

Excluding fuel, sales volumes fell by 0.2 percent in the month. The ONS also revised October’s drop in retail sales to 0.9 percent, a marginal improvement on the previous estimate of 1.1 percent. Over the rolling three months, sales increased by 0.6 percent, attributed largely to robust trading in September.

November’s downturn impacted food stores and non-store retailers most significantly. Food sales dropped by 0.5 percent, while online and non-store retailing saw a sharper 2.9 percent decline. A notable decrease in online gold purchases followed stabilisation in the price of the precious metal, which had surged to record levels in October. Supermarkets experienced reduced customer visits despite Black Friday promotions coinciding with one of the wettest Novembers in recent memory.

In contrast, department stores and outlets focused on clothing, footwear, and household goods emerged as relative winners, drawing footfall with discounting strategies. Nevertheless, aggregate sales volumes remain 3 percent below pre-pandemic levels. Households continue to prioritise savings after prolonged high inflation and increased interest rates.

Rob Wood, chief economist at Pantheon Macroeconomics, cited the uncertain pre-budget environment as a contributor to two consecutive monthly declines in retail sales following four months of recovery from June to September. These trends offer an early indicator for economic growth, with retail figures closely watched for their impact on quarterly GDP. The Bank of England maintained a forecast of 0.3 percent expansion for the fourth quarter; however, most economists now expect a slowdown toward just 0.1 percent growth. Wood noted that weak retail performance is likely to limit the overall GDP contribution from consumer spending in the final quarter.

Recent indicators show some optimism. Consumer confidence improved after the budget announcement on 26 November, as evidenced by a household sentiment poll from GfK, which gained two points. Output in the private sector has also rebounded, according to December purchasing managers’ surveys.

Matt Swannell, chief economic adviser at EY Item Club, cautioned that the retail data for November should be viewed with scepticism due to seasonal adjustments related to Black Friday and Cyber Monday, which may result in later data revisions. He emphasised the need to await December figures before forming definitive conclusions about the sector’s overall health, given the high proportion of annual retail sales generated in the year’s final months.