UK Retail Sales Drop Sharply in December

Retail sales fell 3.2% in December from November, compared with a forecast for a 0.5% decline

Alliance News 19 January, 2024 | 8:55AM
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Oxford Street shopping

UK retail sales figures for the final month of 2023 came in much weaker than expected, official data on Friday showed.

According to the Office for National Statistics, retail sales volumes dropped 2.4% year-on-year in December. This followed a 0.2% rise in November, which was upwardly revised from a 0.1% increase.

The December reading also came in worse than expected, with market forecasts of a 1.1% increase, according to FXStreet-cited consensus.

"On an annual basis, sales volumes fell by 2.8% in 2023 and were their lowest level since 2018," the ONS noted.

Retail Sales Disappoint - the Morningstar View

Michael Field, European Market Strategist, said:

“UK retail sales ultimately proved a disappointment in 2023. While November’s rise in sales gave us hope, that was soon dashed in December, with the largest monthly decline since the pandemic. Retail sales fell by 3.2%, against expectations of just a 0.3% point fall. This is something that will undoubtedly shock the markets. 

“This has completely changed the picture for 2023, with retail sales now having fallen by 2.4% over the period. This is not a great result, and despite GDP being positive over the same period, it is a clear sign that the UK economy is struggling. 

“Non food sales fell more heavily, down almost 4% in December, a clear sign that consumers are cutting back on non-essential items.  

“UK mortgage rates are coming down, but off a very high base. BBA rates are still close to 8%, putting further pressure on household incomes. The effect of higher interest rates is still feeding its way through the economy. Unfortunately, this means that retailers could be in for more pain in 2024.” 

Inflation is Up Too

Earlier this week, ONS data showed a small uptick in inflation, potentially dashing hopes of an early interest rate cut. Wage growth has eased off too - a positive for the Bank of England but negative for workers trying to keep up with the rising cost of living.

Retail Sales - Monthly Changes

Retail sales fell 3.2% in December from November, coming in well below market consensus. A monthly decline of 0.5% was forecast, according to FXStreet. In November, retail sales had risen 1.4% from October, revised from a previous 1.3% rise.

"December's decrease was the largest monthly fall since January 2021, when coronavirus restrictions affected sales," the ONS noted.

Excluding fuel, retail sales fell 2.1% annually in December, after rising 0.5% in November. Market forecasts had expected a 1.3% rise. Non-fuel sales fell 3.3% on-month in December, after rising 1.5% in November from October. A decline of just 0.6% was expected.

  

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