UK retail sales fall more than expected in December, ONS reveals
UK retail sales in December fell the most since April 2012 as an increase in average store prices deterred shoppers, official data revealed on Friday.
The Office for National Statistics said retail sales, including auto fuel, declined 1.9% in December compared to a month ago, far worse than the 0.1% decrease expected by analysts and following a 0.2% month-on-month rise in November.
Compared to the same month a year ago, retail sales rose 4.3% in December, missing forecasts for a 7.5% increase and following a 6.6% year-on-year gain in November.
Average store prices increased by 0.9% on the year, as higher import costs - due to a weaker post-Brexit pound – were passed onto consumers. For all retail items excluding fuel, prices increased by 0.1%, the first rise since June 2014.
Online sales, which accounted for about 15% of all retail spending, jumped 21.3% year-on-year but dipped 5.3% month-on-month.
Despite a decline between November and December - removing the effects of Christmas spending - fourth quarter retail sales growth was 5.6% on the same period last year and 1.2% compared to the previous quarter.
“In recent years, it has become increasingly more meaningful to look at retail sales over the whole of the fourth quarter rather than concentrate particularly heavily on December as increased discounting (particularly Back Friday in late November) has tended to bring some sales forward,” said Howard Archer, chief market analyst at IHS Global Insight.
“So it still looks probable that consumers made a decent contribution to fourth quarter GDP growth, although likely less so than in the third quarter (when retail sales grew 1.8% quarter-on-quarter). This is consistent with our view that GDP growth likely edged back to 0.5% quarter-on-quarter in the fourth quarter from 0.6% in the third quarter.”
Archer, however, said the extent of December’s retail sales fall fuels suspicion that consumer spending will be “markedly softer” in 2017 as inflationary pressures rise and fundamentals for consumers progressively weaken.
Recent data from GfK revealed that consumer confidence declined overall in the fourth quarter due to concerns about the UK economy and rising inflation following Britain's vote to leave the European Union in June.