UK retail sales fall at fastest rate in nearly five years

UK 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.
High street sales slumped as online business hit new highs. Picture: Neil HannaHigh street sales slumped as online business hit new highs. Picture: Neil Hanna
High street sales slumped as online business hit new highs. Picture: Neil Hanna

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

That is the biggest monthly decline since April 2012, when sales also dropped by 1.9 per cent.

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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 news caused the pound to tumble in value against both the dollar and the euro.

The statistics agency said the largest contribution to the monthly decline came from non-food stores.

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

He said: “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.”

The news 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.

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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.