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British retailers had a disappointing December as consumers held back from making big purchases during the festive period, according to industry data published on Tuesday.
Retail sales grew by an annual rate of 1.7 per cent in December, down from 2.7 per cent the previous month and below the 12-month average of 3.6 per cent, the figures from the British Retail Consortium show.
The increase in sales lagged behind the 3.9 per cent inflation rate for November, indicating that households bought fewer goods despite spending more in nominal terms. Such a trend has been in place since the second half of 2021.
“The festive period failed to make amends for a challenging year of sluggish retail sales growth, as weak consumer confidence continued to hold back spending,” Helen Dickinson, chief executive of the British Retail Consortium, said.
She added that discounting in the traditional post-Christmas sales was “unsuccessful in enticing spend in areas such as furniture and homeware, with households remaining cautious about making larger purchases”.
Analysts are closely monitoring economic data for the last two months of 2023 after the economy marginally contracted in the third quarter and fell 0.3 per cent month on month in October, raising fears of a possible technical recession. Official GDP figures for November are due to be published this week.
Other recent economic data has been more promising.
The closely watched purchasing manager indices suggested last week that the services sector in December had recorded the strongest growth in six months, while mortgage approvals rose to a five-month high. Other research indicated that inflationary pressures continued to ease at the end of last year.
Consumer credit card figures from Barclays for December, also out on Tuesday, supported the BRC data with spending up 2.3 per cent year on year, below both the rate of inflation and the 2.9 per cent annual growth recorded in November.
Barclays data, which covers nearly half of the nation’s credit and debit card transactions, reported that spending on electronics, furniture and clothing all fell year on year, by 5.1 per cent, 4.7 per cent and 2 per cent, respectively. Restaurants also reported a fall on December 2022, but bars, pubs and clubs had a better month with spending up 7.9 per cent.
Supermarkets reported their lowest growth since September 2022 at 2.8 per cent, which Barclays in part attributed to shoppers stocking up on festive food and drink in November, taking advantage of early supermarket discounts and deals.
The travel sector had a strong month, however, with spending on airline tickets up 20.2 per cent year on year and travel agents reporting a 12.8 per cent increase, both well ahead of November’s growth rates.
The entertainment sector was another bright spot, with spending up 12.3 per cent after a 1.7 per cent decline in November. Barclays said that early bookings for Glastonbury Festival and cinema blockbuster releases such as Wonka and Aquaman and the Lost Kingdom had helped the rebound.
Karen Johnson, head of retail at Barclays, said that, while grocery and retail spending “didn’t see as much of an increase as we might have expected during the height of the festive season”, “hospitality and leisure businesses will be encouraged by December’s strong growth”.
