UK retail sales fall as price rises bite

December volume of goods sold in stores and online drops 1.9% from November, ONS says

UK retail sales fell at the fastest pace in almost five years in December as rising prices saw consumers buy less of everything from household goods to clothing and food.

The volume of goods sold in stores and online fell 1.9 per cent from November, the Office for National Statistics said yesterday. That was the biggest drop since April 2012 and far exceeded the modest decline predicted by economists. Sales excluding auto fuel fell 2 per cent.

Possible explanations include price increases and consumers scaling back purchases after taking advantage of Black Friday discounts the previous month, statisticians said. The fourth quarter as a whole saw sales rise 1.2 per cent, meaning the sector made a 0.1 percentage point contribution to gross domestic product.

Consumers have weathered the Brexit vote so far but they now face a squeeze from rapidly accelerating inflation as the weak pound pushes up the cost of imports. The price of retail goods sold in December, as measured by the deflator, increased on an annual basis by 0.9 per cent, the most in three years. Excluding auto fuel, they increased 0.1 per cent, since 2014.

“This is likely to be the theme for the rest of the year — higher prices will reduce disposable income and hurt consumer spending growth,” said Alan Clarke, an economist at Scotiabank. “We know from the CPI data earlier in the week that prices rose more than expected in December and now we also know that sales volumes fell.”

The pound fell following the data and was at $1.2300 as of 9.48am. London time, down 0.3 per cent on the day.

Sales of household goods fell 7.3 per cent in December, the biggest drop since January 2010. It followed a 5.2 per cent jump in November when prices for many goods were discounted. Clothing and footwear sales declined 3.7 per cent, the most in a year, and department stores saw sales decline 1.2 per cent. Food sales fell 0.5 per cent and auto fuel fell 1.1 per cent. the first gain