UK retail sales fell at the fastest pace in almost five years in December as rising prices saw consumers buy less of everything from household goods to clothing and food.
The volume of goods sold in stores and online fell 1.9% from November, the Office for National Statistics said on Friday. That was the biggest drop since April 2012 and far exceeded the modest decline predicted by economists. Sales excluding auto fuel fell 2%.
Possible explanations include price increases and consumers scaling back purchases after taking advantage of Black Friday discounts the previous month, statisticians said. The fourth quarter as a whole saw sales rise 1.2%, meaning the sector made a 0.1 percentage point contribution to gross domestic product.
Consumers have weathered the Brexit vote so far but they now face a squeeze from rapidly accelerating inflation as the weak pound pushes up the cost of imports. The price of retail goods sold in December, as measured by the deflator, increased on an annual basis by 0.9%, the most in three years. Excluding auto fuel, they increased 0.1%, the first gain since 2014.
“This is likely to be the theme for the rest of the year -- higher prices will reduce disposable income and hurt consumer spending growth,” said Alan Clarke, an economist at Scotiabank. “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.”
Household Goods
The pound fell following the data and was at $1.2300 as of 9:48 a.m. London time, down 0.3% on the day.
Sales of household goods fell 7.3% in December, the biggest drop since January 2010. It followed a 5.2% jump in November when prices for many goods were discounted. Clothing and footwear sales declined 3.7%, the most in a year, and department stores saw sales decline 1.2%. Food sales declined 0.5% and sales of auto fuel fell 1.1%.
Total retail sales rose 4.3% from a year earlier compared with a peak of 7.2% as recently as October, the figures show.
News by Bloomberg, edited by ESM. Click subscribe to sign-up for ESM: The European Supermarket Magazine.
