Christmas retail sales much lower than expected

Christmas saw the worst month for retail sales in nearly three years, raising the risk that the UK economy tipped into recession at the end of last year.

Analysts at Capital Economics said the weak spending increased the chances that the country was now in a technical, or “weak”, recession.

Sales by UK retailers fell at their fastest rate in nearly three years in December as consumers did some of their Christmas shopping earlier than usual.

The Office for National Statistics (ONS) said that retail sales volumes have had the worst performance since January 2021, and are thought to have dropped 3.2 per cent in December, down from a rise of 1.4 per cent the month before.

The figures have been seasonally adjusted, meaning the actual figures were likely to be higher than reported in November, but the rise was less than in past years.

Heather Bovill, deputy director for surveys and economic indicators at the ONS, said: “Following a strong November, retail sales plummeted in December with all types of outlets being hit.

“This was the largest overall monthly fall since January 2021, when the reintroduction of pandemic restrictions knocked sales heavily.

“Food stores performed very poorly, with their steepest fall since May 2021 as early Christmas shopping led to slow December sales.

“Department stores, clothing shops and household goods retailers reported sluggish sales too as consumers spent less on Christmas gifts, but had also purchased earlier during Black Friday promotions, to help spread the cost.

“The longer-term picture remains subdued, with quarterly sales dipping, while annual sales volumes fell for the second consecutive year, to their lowest level in five years.”

Alex Kerr, assistant economist at Capital Economics, said: “The fall in retail sales volumes in December was far worse than expected and suggests that the Black Friday boost to retail sales proved short-lived. Today’s release would subtract around 0.15 percentage points from real gross domestic product growth in December, which increases the chances the economy may have ended 2023 in the mildest of mild recessions.”

Shadow chief secretary to the Treasury Darren Jones, remarking on the fall in retail sales, said: “Fourteen years of Conservative economic failure have left working people worse off and are forcing families to cut back.

“A decade of low economic growth has left Britain with the highest tax burden in 70 years, with families set to be £1,200 a year worse off under the Tories’ tax plans.

“It’s time for change. Rishi Sunak should call an election and give the people the chance to vote for a Labour government that will get Britain’s future back.”