After consumers were forced to pay more for fewer goods as a result of a squeeze on costs of living, UK retail sales unexpectedly fell last month, capping the worst year on record.

The Office for National Statistics reported on Friday that the volume of goods purchased in stores and online decreased by 5.8% from a year earlier, marking the sharpest decline in December since records began in 1997. That was higher than the 4% drop that economists had anticipated. Sales fell 6.1% without taking into account fuel for automobiles, the most since records began in 1989.

The figures highlight the severity of inflation, which is still hovering close to its four-decade high, draining consumers’ spending power and causing the sharpest decline in real incomes in decades. In order to bring prices back under control, the Bank of England is likely to raise interest rates once more.

According to the ONS, “consumers cut back on spending due to increased prices and affordability concerns” were the primary contributors to the decline in retail sales. According to reports from supermarkets, people bought more before Christmas and reduced their purchases in December.

Heather Bovill, ONS deputy director for surveys and economic indicators, stated, “This was due to increased food prices and the rising cost of living.”

The UK’s high street is still feeling the brunt of the biggest drop in income in a generation. The unexpected drop in retail sales highlights the downside risk to this, even though we anticipated that the economy would show stagnation at the end of last year. According to Bloomberg Economics’ Niraj Shah, “We see consumer spending remaining under pressure going forward” due to the ongoing squeeze on incomes.

Before the official numbers were released, retailers had reported a mixed picture of sales.

While online clothing giant Boohoo Group Plc’s revenues decreased 13% in comparison to the same period in 2021, Next Plc reported a better-than-expected Christmas, with sales of full-price items up almost 5% year-over-year in the nine weeks to December 30.

And while Marks & Spencer Plc, J Sainsbury Plc, and Lidl Ltd. all experienced strong Christmas trading, Dr. Martens Plc, a shoe company, and Asos Plc, an online fashion store, both experienced difficulties.

Sales were 13.6% higher in value terms in December compared to levels prior to COVID, but volumes were 1.7% lower, indicating how hot inflation is reducing consumers’ spending power. As a result, consumers are paying more for less.

In the days leading up to Christmas, postal strikes pushed more people to shop in person rather than online. A half percentage point less of total sales came from e-commerce, which accounted for 25.4%.

According to Erin Brookes, managing director and head of retail in Europe at restructuring firm Alvarez & Marsal, inflation “hit consumers and retailers hard” over Christmas.

She stated, “In December, the combination of rail and postal strikes provided retail with a double whammy of disruption, limiting the number of shoppers in-store and ensuring that packages reached doorsteps in time for Christmas.”

After a 0.5% decline in November, retail sales decreased by 1% in December.

The economists had anticipated a 0.5% increase. Consumer sentiment deteriorated once more in January, according to a separate survey conducted by GfK, a market research firm. It remains well below negative territory.

Olivia Cross of Capital Economics stated, “With a renewed fall in consumers’ confidence in January, that weakness is very likely to continue as the broader economy slips into recession in 2023.” The economy appeared to lose some of its resilience toward the end of last year.

As the cost-of-living crisis squeezed incomes and consumers prepared for higher taxes and energy bills, UK retail sales fell more than anticipated in March. Prices also bit.

Public by world news spot live


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