Retailers suffer ‘terrible’ December as sales slump

Alan Clarke at Scotiabank described the sales figures as 'terrible'. Picture: Ian Georgeson
Alan Clarke at Scotiabank described the sales figures as 'terrible'. Picture: Ian Georgeson
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Retail sales fell at the fastest rate in nearly five years last month, as shoppers spent less on clothing, footwear and household goods in the run-up to Christmas.

The Office for National Statistics (ONS) said sales fell 1.9 per cent month-on-month in December, compared to a 0.1 per cent fall in November. Economists had been forecasting a drop of just 0.1 per cent.

The fall marked the biggest monthly decline since April 2012, when sales also dropped by 1.9 per cent.

On an annual basis, the overall rate of retail sales growth was 4.3 per cent, but that still marked a slowdown from 5.7 per cent in November.

The pound tumbled on the news, falling 0.4 per cent against the dollar to $1.228, and 0.2 per cent against the euro to €1.154.

The statistics agency said the largest contribution to the monthly decline came from non-food stores, which covers department stores, clothing and household goods.

READ MORE: Inflation soars to 1.6% as weak pound pushes up prices

Alan Clarke, economist at Scotiabank, described the figures as “terrible”.

He added: “UK retail sales volumes were terrible in December... much worse than expected.

“We know from the CPI data earlier in the week that prices rose more than expected in December and now we also know that sales volumes fell. This is likely to be the theme for the rest of the year – higher prices will reduce disposable income and hurt consumer spending growth.”

It came as average store prices rose for the first time since June 2014, increasing 0.9 per cent year-on-year, and 0.1 per cent when excluding fuel.

Earlier this week, the ONS said the annual rate of inflation jumped to a two-and-a-half-year high of 1.6 per cent in December, squeezing families with higher price tags for food, petrol and air fares.

But the agency noted that the three-month trend was still showing underlying sales growth of 1.2 per cent compared to the preceding quarter.

ONS senior statistician Kate Davies said: “Retailers saw a strong end to 2016 with sales in the final quarter up 5.6 per cent on the same period last year, although the amount bought fell between November and December once the effects of Christmas are removed.

“There were some notably strong figures from smaller retailers, in particular butchers, who reported a significant boost in sales in the run-up to Christmas.”

Online retail sales also grew by a whopping 21.3 per cent compared with the same month in 2015, but dropped 5.3 per cent on a monthly basis.

It meant that online shopping accounted for about 15 per cent of all sales in December, with average weekly spending reaching £1 billion.

Ian Gilmartin, head of retail and wholesale at Barclays, said it was important not to focus “too heavily” on the monthly dip in retail sales.

“This partly reflects the industry’s evolving approach to Black Friday and the period after it, as Christmas spending is now spread over a longer period,” he said.

“It doesn’t really matter to a retailer whether they generate revenue in November or December. What they care about is their overall performance, and this data shows that the net result for the final quarter was much more impressive this year.”

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