9th February 2023
Young people shopping for clothesGetty Images

Retail sales fell by 1% in December from the month before as shoppers cut back on spending.

The Office for National Statistics (ONS) said that retailers told them “consumers are cutting back on spending because of increased prices and affordability concerns”.

There was a sharp drop at non-food stores, but food stores also reported a fall in sales.

The ONS also revised down figures for November.

It said that sales volumes fell by 0.5% instead of the original estimate of a 0.4% drop.

The rate of price rises, or inflation, remains close to a 40-year high, despite slowing slightly to 10.5% in December.

While the amount of goods and food bought fell in December, rising prices mean a large number of retailers have reported strong sales figures based on value over the Christmas period.

The ONS said the drop in food sales during December reinforced the view that people stocked up for Christmas earlier. In November, the volume of retail sales at food stores rose by 1%.

“After last month’s boost as shoppers stocked up early, food sales fell back again in December with supermarkets reporting this was due to increase food prices and the rising cost of living,” said Heather Bovill, deputy director for surveys and economic indicators at the ONS.

Online sales also fell between November and December. The proportion of online sales dipped to 25.4% from 25.9% in the previous month.

Ms Bovill said feedback from retailers indicated “postal strikes were leading people towards purchasing more goods instore”.

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Bill Grimsey, the former boss of Iceland and Wickes, told the BBC’s Today programme: “Christmas is the key trading time for retailers to often make a difference between profit and loss, particularly in the food sector where volumes are so very important.”

Looking ahead Mr Grimsey said: “It is going to be a tough year. I think inflation will start to come down but… fighting for every £1 at the tills is the name of the game for all retailers that rely on top line sales for bottom line profits.”

December’s figure was much weaker than expected, with Capital Economics calling it a “disappointing end to a difficult year”.

“Today’s retail sales release suggests that some of the resilience in the economy towards the end of last year appeared to peter out in December,” said Olivia Cross, an economist at Capital Economics.

“What’s more, we think the bulk of the drag on activity from high inflation and rising interest rates has yet to be felt and will weigh more heavily on retail spending and the overall economy in 2023.”

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