High Street sales slump
UK retail sales fell unexpectedly in December, and at their most rapid pace for pre-Christmas trading since 1981.
The Office for National Statistics said retail sales fell 1% on the month in December after a 0.6% gain in November. The City had expected sales to rise 0.3% in the crucial run-up to the festive season.
The slump brought down the annual rate of growth to 3.2% from 5.9% in the year to November. Clothing retailers and non-specialist stores were the worst hit, according to the figures, with only internet retailers showing any significant growth, according to the ONS. Department stores also came off badly, with volumes tumbling 2.4%.
A spending slowdown had been predicted in several industry reports in recent weeks, but the City has been hanging on confirmation of the exact impact. Experts have predicted that the UK's consumer boom, which has resulted in Britons building up record debt of more than £1 trillion, must soon run out of steam. The effect has already been seen in the property market with estate agents reporting that house prices have been edging lower for six months.
Shares in retailers, most of which were up in early trading, saw a slight sell-off. By mid-morning, Marks & Spencer was down 3p at 352¾p, WH Smith was 2p lower at 356½p, while Boots was off 2p at 669½p.
The sector has delivered mixed trading statements in recent weeks. M&S issued a dismal update and a profits warning, however supermarket group Tesco impressed the City last week with its sales growth.
'We still believe that it is too soon to conclude that the consumer is throwing in the towel,' said Simon Rubinsohn, chief economist at broker Gerrard. 'The combination of a record level of employment and the rising trend in average earnings raises the possibility of a re-acceleration in spending during the early part of the year.'
The weak data may have little impact on expectations for steady interest rates in coming months as Bank of England Governor Mervyn King said in a speech yesterday that it would be foolish to place too much weight on one month's retail sales figure, particularly at Christmas.
'We should recognise the true meaning of the Christmas story will not be revealed until Easter, or possibly much later,' he said.
Money markets expect rates to remain on hold for at least the next few months. Economists are divided on the direction after that. Brian Hilliard, economist at Société Générale, said: 'What King said was absolutely right. This data will not spook the Bank into making rate cuts.'
Separately, the ONS said public sector borrowing deteriorated in December on a year ago to £14.69bn, the worst December since records began in 1984. But officials added that the slide was largely due to timing factors, as there were some items of expenditure that were scheduled for January but the cash was paid out in December, across several departments.
OF 250 people who voted in a This is Money poll, 75% said they had spent less than last year in the sales. See the link below to vote.
