Surprise Fall in UK December Retail Sales

The Office for National Statistics has reported retail sales figures in Great Britain for December:

• Retail sales volumes fell by 0.3% in December 2024 following a rise of 0.1% in November. 
• Non-food store sales volumes rose by 1.1%, Food fell by 1.9%. Clothing sales volumes rebounded by 4.4% following large falls in the previous two months.
• Retail sales had been expected to rise by 0.4%

“The December drop is due food sales, which sank to the lowest level since 2013, hurting supermarkets in particular, the ONS said.

Elliott Jordan-Doak, senior economist at Pantheon Macroeconomics commented: “Disappointing retail sales raise the risk of a small GDP fall in Q4,” adding that the Bank of England would “definitely cut rates” when the Monetary Policy Committee meets next month. The MPC left rates unchanged at 4.75 per cent in December after cutting borrowing costs twice in 2024. Markets largely expect that the central bank will cut its benchmark rate by a quarter-point in February.

Charlie Huggins, Manager of the Quality Shares Portfolio at Wealth Club commented: “Retail sales volumes came in below expectations in December, with a good performance from clothing more than offset by weakness in supermarket sales.

“There was a notable shift to online sales in December. This is not great news for many store-based retailers, even those with online operations. Most retailers make lower profit margins online and their stores have high fixed costs, which are set to rise again in April following the Autumn Budget. Without higher revenues in store to offset these costs, profitability across the sector is likely to come under pressure.

“Overall, UK retailers are stuck between a rock and a hard place. The significant increase to labour costs is bad enough, and higher for longer interest rates could yet undermine consumer confidence. Rising online sales penetration, if sustained, may be the final nail in the coffin for many.”