UK retail sales are "stark reminder" economic activity is on decline

(Alliance News) - Retail sales in the UK unexpectedly fell in November against the previous month, data showed on Friday.

For Hargreaves Lansdown's Sophie Lund-Yates, this was a "stark reminder" that economic activity in UK shrinking.

According to the latest figures from the Office of National Statistics, retail sales volumes in the UK are estimated to have fallen by 0.4% in November, after a revised 0.9% rise in October. Market consensus, as cited by FXStreet, had expected a 0.3% increase in November.

Compared with the same period a year earlier, retail sales volumes fell by 5.9% in November. The market had expected a 5.6% fall.

"Retail's fairy godmother has failed to wave her magic wand," said Danni Hewson at AJ Bell, noting that even Black Friday promotions and a rush by households to spread the cost of a Christmas feast weren't enough to lift sales.

Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said that the drop suggests that consumers are buckling under the pressure of surging inflation, despite additional government support for their energy bills.

"True, the fall in November only partly offset the 0.9% rise in October. But that rise largely reflected a reversal of the impact of the additional Bank Holiday in September for the state funeral [of Queen Elizabeth II]. Taking a step back from the volatility, retail sales still are 1.5% below their 2019 average level, compared to 3% above at the turn of the year," Dickens explained.

Dickens said the outlook for UK retail sales is bleak. Retailers likely will endure a further drop in demand in December due to the heavy snowfall, pointing to data showing that sales volumes fell by 2.1% month-to-month during the December 2010 snowstorms.

For next year, the Pantheon economist expects equally gloomy things as households' real disposable incomes are "pummelled by rising energy prices and falling employment".

AJ Bell's Danni Hewson called rising costs the "X-factor" behind the decline.

"It could be people are waiting until they've got their Christmas pay cheques in their hands and with the big day on a Sunday there is still plenty of time for tills to ring out their merry tune. But cost is the X-factor looking at sales numbers from the three-month period a year ago and comparing them to the last three months the story is pretty easy to read.

"People are paying a whole lot more to buy a whole lot less and that's hurting consumers and retailers alike."

By Heather Rydings, Alliance News senior economics reporter

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