- Written by Dearvale Jordan
- BBC News business reporter
image source, Getty Images
Retail sales volumes fell by 3.2% in December, the biggest fall since the UK went into coronavirus lockdown.
Official figures revealed a sharp decline in demand for goods, with food sales also falling ahead of Christmas.
The Office for National Statistics (ONS) said it appears people took advantage of the Black Friday sales to shop in early November.
This means retail sales fell at the fastest pace since January 2021.
ONS said The amount of non-food items people bought in December fell by 3.9%. In contrast, it increased by 2.7% in November.
Demand for food was also sluggish, dropping 3.1% at the end of the year, but food sales rose 1.1% in November.
“Large family gatherings are down, and people are buying fewer presents overall,” said PwC’s Lisa Hooker.
He added that people are “holding back on areas such as toys, sporting goods, watches and jewellery”, but fashion is “one of the least affected categories”.
Heather Bovill, deputy director for research and economic indicators at the ONS, said December’s drop in retail sales was “the biggest overall monthly decline since January 2021, when sales were hit hard by the reintroduction of pandemic restrictions.” “The largest,” he said.
He said November discounts encouraged people to shop early for Christmas, but department stores, clothing retailers and home goods retailers said they were encouraging consumers to spend less on gifts. He said there was also evidence that it was decreasing.
It was the biggest drop since January 2021, when further coronavirus restrictions came into force, but the amount of goods people actually bought in December was lower than when the first coronavirus lockdown was implemented. This is the lowest since May 2020.
Supermarkets have reported strong sales over the Christmas period, helped by price increases over the past year.
For non-food stores, the pattern varies. Fashion chain Next posted strong sales, but JD Sports issued a profit warning after trading was lower than expected.
Specialist wine retailer Majestic said it had recorded record sales in the run-up to Christmas, supported by a recovery in business with the hospitality industry.
But chairman and chief executive John Colley told the BBC’s Today program that, overall, consumers were still reeling from the soaring food prices seen over the past 12 months.
“I think the effects of inflation are still there… I think consumers are still feeling the pinch and I still don’t think it’s over.”
Earlier this month, the British Retail Consortium predicted a “difficult” year ahead for the industry, with household budgets still under pressure from rising costs of living.
The weaker-than-expected retail sales also increased the risk that the UK ends 2023 in “the mildest of mild recessions”, said Alex Kerr, assistant economist at Capital Economics.
A recession is usually defined as two consecutive three-month periods (or quarters) in which economic output contracts.
The UK economy contracted by 0.1% between July and September. It contracted again in October, but rebounded in November.
Mr Kerr said December’s drop was “much larger” than expected, even taking into account the impact on shopping from Black Friday sales.
“It may also be due to consumers pushing their Christmas shopping forward to November,” he said. “But it is also because the impact of the cost of living crisis and sharply rising interest rates continues to weigh on real incomes and consumer spending.”
The inflation rate, which measures the rate of increase in prices, has fallen sharply since its high in October 2022.
However, the latest inflation figures show that inflation rose slightly to 4% in December, contrary to widespread expectations that it would continue to fall.
Economists and financial markets had expected the Bank of England to cut interest rates this year, possibly in the spring.
However, recent inflation data suggests a rate cut may not occur until June. The current interest rate is 5.25%.
