Inflation-pinched Official data showed on Friday that British consumers cut their Christmas shopping by the most in at least 25 years, dashing hopes for a Christmas boost for the country’s flagging retail sector.
Sales volumes were down 5.8% compared to December 2021, the largest drop for that month in records dating back to 1997, and the ninth month in a row in annual terms.
The Office for National Statistics reported that sales fell by 1% from November, defying a Reuters poll of economists who predicted a 0.5% monthly increase.
Sterling dropped in value against the US dollar and the euro.
According to Olivia Cross of consultancy Capital Economics, the unexpected drop suggests 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.
According to a survey, consumer confidence fell for the first time in three months in January, falling close to its lowest level since at least 1974.
The British economy is widely expected to enter a recession.
In 2022, retail sales volumes fell 3.0%, their worst full-year performance since at least 1997.
Food sales rose in November as shoppers stocked up early for Christmas, according to Heather Bovill, ONS deputy director for surveys and economic indicators, but fell again in December, with supermarkets attributing the drop to rising living costs.
Food sales fell 0.3% in December after rising 1.0% in November. Non-food store sales decreased by 2.1%.
Overall spending was down 1.2% month on month from November in terms of value.
On Thursday, Bank of England Governor Andrew Bailey struck a more upbeat tone, declaring that recent drops in inflation were “the beginning of a sign that a corner has been turned.”
Nonetheless, the Bank of England is expected to raise interest rates for the tenth time in a row on February 2.
According to Helen Dickinson, CEO of the British Retail Consortium, retailers and customers are still facing cost pressures, but the situation will improve in the second half of 2023.
Christmas trading updates from Britain’s biggest retailers, such as Tesco, Sainsbury’s, and Marks & Spencer, were better-than-expected, with shoppers returning to stores rather than shopping online being a key trend.
According to the ONS, online sales fell in December due to postal worker strikes.
Boohoo, an online retailer, reported an 11% drop in revenue over Christmas, owing to the strikes.
In earnings released earlier this week, higher-end retailer Ocado (OCDO.L) was hit by rising living costs.
Tesco’s chairman, John Allan, stated that Friday’s figures highlighted the importance of a long-term economic growth strategy.
“What we’d love to see from government is a really serious, thought-through, long-term growth plan,” Allan told BBC radio.
(Adapted from BBC.com)