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Not a ‘bumper season’ as retail sales fall in December

Written by: Adam Lewis
While Christmas shoppers spent more in December 2016 than a year earlier, numbers from the Office for National Statistics (ONS) showed a monthly decline in retail sales.

According to the ONS, while retail sale volumes in December 2016 increased by 4.3% compared with December 2015, the actual value spent year-on-year rose by 5.4%.

However, sales volumes dropped 1.9% when compared with November 2016. The ONS said this may be the result of rising prices. Fuel prices in particular rose by 9.7% over the course of the year, contributing to an overall 0.9% rise in average store prices, year-on-year.

Online sales continued to go from strength to strength, with a 21.3% rise in sales, and now accounting for 15.1% of all retail spending (excluding fuel), up from 13.1% in December 2015.

Commenting on the sales figures, Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “The retail sector saw a strong end to 2016, though there are hints that inflation creeping into the system could be starting to put the squeeze on consumers.

“Rising commodity prices and weaker sterling mean that household budgets are going to feel increasingly pinched at the petrol pumps and the food checkouts. Unless there’s a similar pick up in wages, that’s likely to dent consumer demand.”

December’s month-on-month drop in sales was the second consecutive decline and AJ Bell’s investment director Russ Mould said this suggests it may not have quite been the bumper festive season that early January’s trading updates implied.

“A post-referendum bounce in consumer confidence began to ebb at the end of the year as higher oil and therefore petrol and diesel prices began to take effect, making life harder still for retailers as they had to please price sensitive, internet-savvy customers at the same time as dealing with rising input costs that resulted from the weaker pound,” said Mould.

He added: “Retailers will therefore be hoping that consumer confidence and spending picks up again, especially as feasting off the carcass of BHS will only take them so far.”

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