UK retail sales dropped unexpectedly by 1% in December, despite City expectations of an increase of 0.5%. This is further evidence that consumers are feeling squeezed by the cost of living crisis.
According to the Office for National Statistics (ONS), November’s retail sales fell 0.5%, compared with 0.4% in February. The mean sales volume was 1.7% lower than their pre-coronavirus(COVID-19), February levels.
The ONS reported that non-food store sales fell 2.1% in the past month. There was continued feedback from retailers, and more evidence that consumers are cutting back spending due to rising prices and affordability worries.
The December 2022 sales volume of food stores fell 0.3% from November’s 1.0% increase. Some retailers commented that customers had stocked up for Christmas early, according to the report.
Online sales decreased to 25% in December 2022, from 25% in November. There is also evidence that Royal Mail strikes have led consumers to shop more in stores.
Gabriella Dickens (senior UK economist at Pantheon Macroeconomics) suggested that although heavy snowfall and intensifying strikes in December may have contributed to the drop in retail sales overall, “the underlying picture” is also weak.
“Looking ahead, households will likely have to deal with rising energy prices and higher new mortgage rates, and falling employment,” she said. “Falling employment will decrease households’ spending both directly, and indirectly, because people will likely save more for preventative reasons and borrow less.
ING economists noted that UK retail sales continue to fall, which is yet another sign that the country is still in a downturn.
They stated that “Coupled to another drop in consumer confidence overnight, recession still seems like the base case” for the UK’s economy.