Inflationary pressures lead to lacklustre December retail sales

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December retail sales

Grocery and food retailers have enjoyed a bumper Christmas trading season, but non-food retail sales took a hit as inflationary pressures forced consumers to tighten their belts.

According to the latest monthly Retail Sales Monitor from the British Retail Consortium (BRC) and KPMG, UK retail sales growth slowed down to 0.6 per cent on a like-for-like basis in the five weeks ending December 30, compared to the same in 2016 when they had increased one per cent.

On a total basis, sales rose 1.4 per cent last month, against a growth of 1.7 per cent in December 2016.

The BRC said this was consistent with the three-month and 12-month averages of 1.1 per cent and 1.5 per cent respectively.

Over the quarterly period ending December 30, in-store sales of non-food items declined 3.7 per cent on a total basis and 4.4 per cent on a like-for-like basis – the deepest since the Retail Sales Monitor began in December 2012.

On a 12-month basis, the total decline was 2.2 per cent.

On an overall basis, non-food retail sales decreased 1.9 per cent on a like-for-like basis and 1.4 per cent on a total basis – the lowest since March 2009.

This is below the 12-month total average growth of zero per cent.

And while online sales of non-food products grew 7.6 per cent in December, it was still below the 12-month average of eight per cent but above the three-month average of 6.2 per cent.

Meanwhile, in the same quarterly period to December, food sales increased 2.6 per cent on a like-for-like basis and 4.2 per cent on a total basis.

This is the highest since June 2016 and remains above the 12-month total average growth of 3.4 per cent.

BRC chief executive Helen Dickinson said the results presented both the “light and dark” in Christmas trading.

“Growth in spending was in line with the, albeit modest, average for the year. However, the divergence between growth in sales of food and non-food has never been so stark,” she said.

“With inflation outpacing income growth, shoppers continued to see more of their spending power absorbed by essential items, including food, leaving less left over for buying Christmas gifts.

“That made this year’s festive period all the more nail-biting for non-food retailers, many of whom offered deep discounts in the last weeks before Christmas in the hope of something to celebrate at the end of a year, which has seen, on average, zero growth in non-food sales.

“These promotions came as a welcome relief for stretched households, although the late lift in sales came at the expense of margins for many retailers.

“Retailers who did well in such a challenging environment got both their discounting strategy and omnichannel offerings right.

“Those who could offer and deliver on last minute delivery options did better, boosting online non-food sales more than 15 percent in the seven days before Christmas, a week when, until now, shoppers would have had to turn to stores to ensure gifts made it under the tree in time.

“With spending likely to remain under severe pressure in the next few years, it’s imperative that in the forthcoming trade negotiations, the government does all it can to avoid adding new tariffs to existing price pressures.”

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