According to official figures released on Friday, British shops saw their largest sales decline in nearly three years in December, increasing the possibility that the economy entered a recession towards the end of last year.
According to the Office for National Statistics (ONS), the 3.2% decline in retail sales volumes between December and November was a result of consumers purchasing for food and other necessities sooner than usual for Christmas.
Sales were at their lowest point since May 2020 as a result of the largest monthly decline since January 2021.
The result was lower than every economist's prediction, which in a Reuters survey had indicated a 0.5% decline.
Retail sales excluding fuel saw the weakest annual growth since December 2022, rising 2.3% in monetary terms but 2.1% less in volume terms as compared to the same period last year.
Although the statistics released on Friday coincided with other negative retail polls from the Confederation of British Industry and British Retail Consortium, it also appeared to contradict some encouraging comments on Christmas trading from the biggest supermarkets in Britain.
The statistics caused the pound to slightly weaken against the euro and US dollar, and the price of British government bonds to increase. In anticipation that the data will lead to early interest rate decreases by the Bank of England, British stocks increased.
The ONS predicted that retail sales will reduce British economic output by 0.04 percentage points in the fourth quarter. This may be the difference between a negative and a flat reading for the economy.
The third quarter saw a 0.1% decline in the economy.
The definition of recession as two quarters of contraction is arbitrary, according to many economists, but it would have significant political ramifications for Prime Minister Rishi Sunak in the upcoming election year.
Sunak is appealing to voters by highlighting the fact that Britain is progressing in the right way, which a recession diagnosis would contradict, given that his Conservative Party is now trailing the opposition Labour Party in opinion polls.
Speaking on Thursday in Davos, Finance Minister Jeremy Hunt stated that he intended to take steps towards tax reductions prior to the yearly budget, which is a significant event that the Conservatives believe can turn things around.
Still, the economic landscape is uncertain.
"Food stores performed very poorly, with their steepest fall since May 2021 as early Christmas shopping led to slow December sales," Heather Bovill, deputy director for surveys and economic indicators at the ONS said.
According to the ONS, there was anecdotal evidence that shoppers had stocked up on gifts and holiday food in November, a month when sales increased by 1.4%.
The data was in conflict with robust reports on the Christmas food trade from the largest supermarkets in Britain, Tesco (opens new tab) and Sainsbury's (opens new tab). Other businesses have opened new tabs and issued earnings warnings, such as the sportswear company JD Sports and the luxury goods brand Burberry.
"The contrast between these figures and the better reported sales announced by several large retailers this month is stark, albeit those numbers will have represented pounds in the till including the impact of inflation, and over a longer time period - including November in most cases," Lisa Hooker, leader of industry for consumer markets at PwC, said.
Despite these modifications, the image is not strong.
The last quarter of 2023 saw a 1.4% decrease in volume for retail sales excluding gasoline compared to the same period last year and a 3.9% increase in cash terms, marking the weakest growth in spending since the three months leading up to February.
"The drags from the cost-of-living crisis and sharp rise in interest rates are still weighing on real incomes and consumer spending," Alex Kerr, economist at consultancy Capital Economics, said.
(Source:www.thefinancialexpress.com)
According to the Office for National Statistics (ONS), the 3.2% decline in retail sales volumes between December and November was a result of consumers purchasing for food and other necessities sooner than usual for Christmas.
Sales were at their lowest point since May 2020 as a result of the largest monthly decline since January 2021.
The result was lower than every economist's prediction, which in a Reuters survey had indicated a 0.5% decline.
Retail sales excluding fuel saw the weakest annual growth since December 2022, rising 2.3% in monetary terms but 2.1% less in volume terms as compared to the same period last year.
Although the statistics released on Friday coincided with other negative retail polls from the Confederation of British Industry and British Retail Consortium, it also appeared to contradict some encouraging comments on Christmas trading from the biggest supermarkets in Britain.
The statistics caused the pound to slightly weaken against the euro and US dollar, and the price of British government bonds to increase. In anticipation that the data will lead to early interest rate decreases by the Bank of England, British stocks increased.
The ONS predicted that retail sales will reduce British economic output by 0.04 percentage points in the fourth quarter. This may be the difference between a negative and a flat reading for the economy.
The third quarter saw a 0.1% decline in the economy.
The definition of recession as two quarters of contraction is arbitrary, according to many economists, but it would have significant political ramifications for Prime Minister Rishi Sunak in the upcoming election year.
Sunak is appealing to voters by highlighting the fact that Britain is progressing in the right way, which a recession diagnosis would contradict, given that his Conservative Party is now trailing the opposition Labour Party in opinion polls.
Speaking on Thursday in Davos, Finance Minister Jeremy Hunt stated that he intended to take steps towards tax reductions prior to the yearly budget, which is a significant event that the Conservatives believe can turn things around.
Still, the economic landscape is uncertain.
"Food stores performed very poorly, with their steepest fall since May 2021 as early Christmas shopping led to slow December sales," Heather Bovill, deputy director for surveys and economic indicators at the ONS said.
According to the ONS, there was anecdotal evidence that shoppers had stocked up on gifts and holiday food in November, a month when sales increased by 1.4%.
The data was in conflict with robust reports on the Christmas food trade from the largest supermarkets in Britain, Tesco (opens new tab) and Sainsbury's (opens new tab). Other businesses have opened new tabs and issued earnings warnings, such as the sportswear company JD Sports and the luxury goods brand Burberry.
"The contrast between these figures and the better reported sales announced by several large retailers this month is stark, albeit those numbers will have represented pounds in the till including the impact of inflation, and over a longer time period - including November in most cases," Lisa Hooker, leader of industry for consumer markets at PwC, said.
Despite these modifications, the image is not strong.
The last quarter of 2023 saw a 1.4% decrease in volume for retail sales excluding gasoline compared to the same period last year and a 3.9% increase in cash terms, marking the weakest growth in spending since the three months leading up to February.
"The drags from the cost-of-living crisis and sharp rise in interest rates are still weighing on real incomes and consumer spending," Alex Kerr, economist at consultancy Capital Economics, said.
(Source:www.thefinancialexpress.com)
