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December retail sales ‘disappoint’ as shoppers hold back spending

Written by: Paloma Kubiak
UK retail sales decreased by 1.5% between November and December 2017, while year-on-year growth rose 1.4%, official statistics reveal.

The quarter-on-quarter retail sales data edged up 0.4%, figures from the Office for National Statistics (ONS) revealed. Over the course of 2017, the quantity bought by shoppers increased by 1.9%, but this is the lowest annual growth since 2013.

The disappointing December data following robust figures reported for November, suggesting that more people are doing their Christmas shopping early, prompted by incentives such as Black Friday.

PwC’s UK consumer markets leader, Lisa Hooker, said with the volume of grocery sales starting to decline, it will be hard for the sector to maintain these growth levels as inflation starts to ease.

She said: “Our research indicates that Black Friday is increasingly having an impact on the Boxing Day and New Years sales. This is because consumers use Black Friday promotions to buy items for themselves, something historically done in the post-Christmas sales.

“Looking ahead, the outlook for retailers remains tough, with muted consumer demand as real incomes are squeezed. Nonetheless, we expect to see both winners and losers in every category of the retail sector. Shoppers will gravitate to brands offering a compelling and differentiated proposition, as well as value for money, which will become increasingly important as purse strings are tightened.”

Some light at the end of the tunnel

Ben Brettell, senior economist at Hargreaves Lansdown, said today’s retail sales data from the ONS were disappointing.

“The figures undershot expectations by some margin. Retail sales made next to no contribution to UK economic growth in the final three months of 2017.

“The big question now is whether this is the start of a worrying trend for the economy, or whether falling inflation and rising wages will come to the rescue. The answer is that it’s too early to say. The monthly data is volatile, so it’s hard to draw firm conclusions, but the underlying trend is definitely one of slowing growth.”

He added that there could be some light at the end of the tunnel though as wage growth seems to be on an upward trend, while inflation may well have peaked.

“This means we could see an end to falling real wages in the coming months, which would provide a welcome fillip to cash-strapped households,” Brettell said.

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