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UK retail sales fall unexpectedly as consumers cut back

UK retail People walk past sale signs on the window of a shoe shop in Manchester, Britain, December 28, 2021. REUTERS/Phil Noble
The Christmas period proved tougher for UK retailers than experts had forecast. Photo: Phil Noble/Reuters

Retail sales in the UK unexpectedly fell by 1% in December, the second month of decline, as cost-conscious shoppers curbed spending over Christmas.

The drop in sales last month was driven by non food sales as "consumers cut back on spending because of increased prices and affordability concerns," according to the according to the Office for National Statistics (ONS).

"After last month's boost as shoppers stocked up early, food sales fell back again in December with supermarkets reporting this was due to increase food prices and the rising cost of living," said Heather Bovill, deputy director for surveys and economic indicators at the ONS.

There was a sharp drop at non-food stores, but food stores also reported a fall in sales. Spending in non-food shops dropped by 2.1% during the month.

Read more: Salary pressures near record high as companies compete for workers

Sales in food stores proved more resilient, with just a 0.3% drop in December. Grocery sales had risen 1% in November, leading some to speculate buyers were stocking up early for Christmas.

Online sales also fell between November and December. The proportion of online sales dipped to 25.4% from 25.9% in the previous month.

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The 1% drop was far worse than the 0.5% rise that experts had been expecting, according to a consensus from Pantheon Macroeconomics.

“December was a whitewash, with only a couple of sales from customers who come back to me every year as they trust that I will do my best and understand the challenges I’m facing,” said Heather Moore, who owns online art shop The Peacock And The Printmaker.

Compared with December 2021, sales were down 5.8% – the biggest fall since 1997.

Helen Dickinson, chief executive of the British Retail Consortium, said: “Many of the cost pressures bearing down on retailers and their customers remain in 2023, with high energy costs, the war in Ukraine, and domestic labour shortages all taking their toll.

“However, BRC modelling suggests the situation will improve in the second half of the year.”

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The rate of price rises, or inflation, remains close to a 40-year high, despite slowing slightly to 10.5% in December.

Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said: "Heavy snowfall and intensifying strike action in December likely contributed to the further drop in retail sales, but the underlying picture is weak too.

"The month-to-month fall pushed retail sales volumes 2.5% below their average level in 2019, the largest shortfall since February 2021, when the UK economy still was in lockdown."

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