UK retail sales rise but miss forecasts over peak Christmas period

UK retail sales rose less than expected over the Christmas period, suggesting that consumer spending has done little to support the economy, while public finances deteriorated ahead of the national lockdown in January, according to fresh data released on Friday.

The volume of sales climbed 0.3 per cent in December compared with the previous month, the Office for National Statistics said, which is lower than a 1.2 per cent increase forecast in a Reuters poll of economists. It follows a 3.8 per cent contraction in November when sales were limited by a month-long lockdown.

“December’s retail sales increased slightly, driven by an improved month for clothing sales, as the easing of some lockdown measures for parts of the month meant more stores were able to open,” said Jonathan Athow, deputy national statistician for economic statistics.

In 2020 retail sales had their largest annual fall in history.

Line chart of Index, 2018=100 showing UK retail sales grew less than expected in December

Retail sales advanced 2.9 per cent compared with the same month a year ago, boosted by consumers switching from consuming services, such as restaurants and bars, to buying goods, such as food and drinks.

Weak retail sales will dent hopes that the UK economy can avoid a contraction in the fourth quarter.

Prolonged and tighter restrictions also took their toll on public finances as revenues fell and spending rose.

In December, the UK central government cash requirement was £33.4bn bringing the total for the nine months to December to £318.1bn, nearly double the highest cash requirement in any other April-to-December period since records began in 1984, separate ONS data showed on Friday.

With government spending soaring due to various support schemes for businesses and workers, coupled with falling tax revenues, public sector net debt rose to 99.4 per cent of gross domestic product in the fiscal year to November, the highest since 1962.

Economists expect consumer spending and public finances to deteriorate further in January as the economy takes a hit from the latest national lockdown.

Chancellor Rishi Sunak said the government has invested more than £280bn to protect jobs and livelihoods across the UK during the pandemic, and he warned that “once our economy begins to recover, we should look to return the public finances to a more sustainable footing”.


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