United Kingdom retail sales make sharp December drop but fourth quarter still strong

21 January, 2017, 00:41 | Author: Celia Hoffman
  • British Pound Tumbles on Disappointing UK Retail Sales

Official data showed retail sales volumes fell 1.9 per cent year-on-year in December, widely missing economists' forecasts in a Reuters poll for a 0.1 per cent decline.

Consumers are also twice as likely to convert sales on Black Friday day as they are on Boxing Day; the latter, arguably the most famous and traditional sales day for millions across the United Kingdom, is being overtaken by the online phenomenon Black Friday, as consumers look at bagging their bargains online towards the tail end of November instead.

Possible explanations include price increases and consumers scaling back purchases after taking advantage of Black Friday discounts the previous month, statisticians said.

Rising petrol prices and the fall in the value of the pound have been blamed for boosting inflation in the last few months.

The largest contribution to the month-on-month fall came from non-food stores.

"This is likely to be the theme for the rest of the year - higher prices will reduce disposable income and hurt consumer spending growth", said Alan Clarke, an economist at Scotiabank.

'It doesn't really matter to a retailer whether they generate revenue in November or December, ' he said.

In the fourth quarter, retail sales logged a notable 5.6% annual growth and 1.2% sequential increase.

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In a busy week for United Kingdom data, annual inflation has jumped to 1.6 percent - the highest level in two and a half years - while unemployment sits at 4.8 percent, a low since 2006.

"The sharp decline in retail sales in December is the first sign that rising inflation and slowing job gains are forcing shoppers to curb their consumption", said Samuel Tombs of Pantheon Macroeconomics.

There were increases in average store prices across all store types, excluding fuel prices, with prices edging up 0.9%.

Sales in December were 4.9 per cent higher than the same month a year ago but this was well below the 7.6 per cent year-on-year growth that analysts had predicted.

Speaking at the World Economic Forum in Davos, Chancellor Philip Hammond admitted that United Kingdom households were already feeling the pinch from the decision to leave the European Union through higher prices and were likely to be hit harder this year as price rises start to outstrip wage rises.

Year-on-year, last month's retail sales increased 4.3% and the weak December figures contrast with many trading reports from jewellery retailers who mostly reported a strong Christmas season.

Shoppers also bought more online, spending about £1bn a week, which was 21.3% higher than in December 2015.

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