Economic Indicators

U.K. retail sales, consumer confidence slump as cost-of-living squeeze tightens


By Geoffrey Smith — Retail sales slumped again in the U.K. in December, while consumer confidence fell to a new low as Britons counted the cost of an expensive holiday season.

The Office for National Statistics said retail sales fell 1.0% from November, their fourth drop in five months, leaving them down 5.8% on the year. Stripping out volatile sales of autos and fuel, core retail sales fared even worse, falling 1.1% on the month and 6.1% on the year.

The figures confirmed what has already been apparent from U.K. supermarket chains’ trading updates, showing that non-food sales suffered particularly badly, as consumers chose to focus their spending on food and drink over the festive period. The ONS said non-food sales fell 2.1% on the month.

Food sales fell a more modest 0.3%, after a 1% rise in November that showed people stocked up early for Christmas. Overall, data from Kantar Worldpanel indicate grocery sales were up nearly 13% from a year earlier in the pre-holiday period.

The ONS cited “continued feedback from retailers and other wider evidence that consumers are cutting back on spending because of increased prices and affordability concerns.”

In addition to the highest inflation in 40 years, retailers also had to deal with a series of strikes by the country’s biggest delivery firm, Royal Mail (LON:IDSI), in December, which hurt the online shopping industry particularly hard. Non-store sales, which have held on to the bulk of the gains in market share that they made during the pandemic, fell to 25.4% of total sales from 25.9% a month earlier.

The market research firm GfK said the cost of keeping larders and tables well-stocked had left consumers with a New Year hangover. Its consumer confidence index sank back toward its record low in January after a modest recovery at the end of 2022.

GfK’s index slumped to -45 from -42 in December. There were particularly sharp drops in subindexes showing the ability to save and the willingness to make major purchases.

“With inflation continuing to swallow up pay rises, and the prospect of some shocking energy bills landing soon, the forecast for consumer confidence this year is not looking good,” said GfK Client Strategy Director Joe Staton. “This month’s six-point decline in the major purchase index does not augur well because consumer spending is a driving force of our economy and future growth.”

The only glimmer of hope, he added, was in a slight uptick in consumers’ assessments of their own personal financial situations, “but this is of little comfort because it is still 25 points lower than this time last year.”


Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button