Spending fell 1.5% in December as consumers brought forward purchases to Black Friday
British shoppers sharply reined in spending over the Christmas period, as Black Friday deals encouraged them to purchase presents earlier, rounding off the weakest year for retail sales growth since 2013.
According to the Office for National Statistics (ONS), spending fell by 1.5% in December after a strong November when the US-inspired discounting event appeared to boost sales. The drop was worse than expected among City economists and is likely to have dented profits for many British retailers over the key shopping month.
Rhian Murphy, senior statistician at the ONS, said there had been an increase in sales over the final three months of the year as a whole, but December had been weaker as consumers pulled forward their shopping to take advantage of Black Friday deals the previous month, mirroring a trend seen in previous years.
In 2017 as a whole, the quantity of products bought in retail sales increased by 1.9% – the lowest annual growth since 2013.
“However, the longer-term picture is one of slowing growth, with increased prices squeezing people’s spending,” Murphy said.
British households have come under intense pressure from weak wage growth and rising inflation, after the sudden drop in sterling following the Brexit vote pushed up the cost of importing food and fuel to the UK. Growth in consumer spending has slowed as a consequence, denting the strength of the economy.
The latest ONS figures show monthly declines in both the value and quantity of goods sold across all major retail sectors, apart from a slight increase in the value of items sold at petrol stations. Shoppers are also increasingly heading online, hurting shops on the high street, with the internet accounting for almost a fifth of all spending in Britain last month.
Compared with December a year ago, there was a 1.4% increase in the amount bought by consumers overall. However, sales of food fell by 0.2% compared with Christmas 2016, which statisticians said was probably owing to rising prices in the shops. But the drop in sales from November to December – which was the biggest monthly fall since June 2016 – rounded off a difficult year on the high street.
Consumers first started to pull forward their Christmas spending from December to November three years ago, when Black Friday began to gain significant traction in Britain. Amazon is credited with bringing the US Thanksgiving holiday sales event to the UK.
The heavy discounting is, however, likely to have hit British retailers’ profits, as well as being a likely factor behind lower revenues on Boxing Day, when the traditional post-Christmas sales period begins, according to Keith Richardson of Lloyds Bank. “It really was a blue Christmas for retailers, especially on the high street,” he said.
“The supermarkets managed to keep the tills ringing with sales of mince pies, prosecco and craft gins, but even this wasn’t enough to hide the fact that non-food suffered a sluggish month.”
The weak official retail sales figures follow a string of downbeat trading updates from high street chains after a torrid Christmas, kicked off by Debenhams issuing a profit warning in the first week of January. Other retail stalwarts including Marks & Spencer and House of Fraser reported disappointing Christmas figures.
The clothing chain Bonmarché added to the gloom on Friday by reporting falling sales, prompting its share price to drop by more than 20%, while Carpetright shares plunged more than 40% after a profit warning.
Economists said the pressure on consumers was likely to lessen somewhat this year, as the effect of the pound’s sudden fall after the Brexit vote began to fade. Inflation eased for the first time in six months in December and is expected to fall further over the coming months.