UK retail sales fell unexpectedly in December by 1%, confounding City expectations for an increase of 0.5%, adding to signs that the cost of living crisis has squeezed consumer's spending power.
The latest data from the Office for National Statistics (ONS) also saw November’s retails sales figure revised to a fall of 0.5% from a 0.4% previously, and mean sales volumes were 1.7% below their pre-coronavirus (COVID-19) February levels.
Non-food stores sales volumes fell by 2.1% over the month, with continued feedback from retailers and other wider evidence that consumers are cutting back on spending because of increased prices and affordability concerns, the ONS said.
Food store sales volumes fell by 0.3% in December 2022 from a rise of 1.0% in November, with comments from some retailers suggesting that customers stocked up early for Christmas, the report added.
The proportion of online sales fell to 25.4% in December 2022 from 25.9% in November, with anecdotal evidence that Royal Mail strikes led to consumers shopping more in stores.
Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, suggested that while heavy snowfall and intensifying strike action in December likely contributed to the further drop in retail sales, “the underlying picture is weak too.”
“Looking ahead, households likely will have to contend with rising energy prices, higher new mortgage rates and falling employment,” she pointed out, while “falling employment will reduce households’ spending both directly and indirectly, as people likely will save more for precautionary reasons and borrow less.”
Economists at ING noted that persistent falls in retail sales are another reminder that the UK is still entering a downturn.
“Coupled with another dip in consumer confidence released overnight, recession still looks like the base case for the UK economy” they said.