Retail sales in the UK fell unexpectedly in December, despite the holiday season, with food sales experiencing their steepest decline in over a decade, according to the Office for National Statistics (ONS).
Retail sales volume slipped by 0.3% month-over-month, reversing November’s revised 0.1% growth and defying expectations of a 0.4% increase. While sales in non-food stores, such as clothing retailers, rebounded from previous declines, they failed to offset the overall slump.
Food Sales Hit Lowest Level Since 2013
Food store sales dropped by 1.9%, marking their lowest index level since April 2013. This significant decline weighed heavily on overall retail performance. In contrast, non-food store sales rose by 1.1%, while automotive fuel sales saw a 1.6% increase.
Excluding automotive fuel, retail sales volumes fell 0.6% in December, following a modest 0.1% rise in November. Analysts had predicted a 0.1% increase, highlighting the surprising nature of the downturn.
Annual Growth Falls Short of Expectations
On an annual basis, retail sales volumes grew by 3.6%, a marked improvement from November’s stagnation. However, the figure fell short of the anticipated 4.2% growth. When excluding auto fuel, sales posted a 2.9% year-over-year increase, a recovery from November’s 0.5% decline but still below economists’ forecasts of 3.6%.
Online Sales Provide a Bright Spot
Online retail sales recorded their first monthly rise since September, increasing by 1.5% in December. On an annual basis, online sales values grew by 1.7%, signaling resilience in digital commerce.
Despite this, the overall sales volume for the fourth quarter fell by 0.8% compared to the previous quarter, though it was 1.9% higher than the same period last year.
For the full year 2024, retail sales volumes rose by 0.7%, rebounding from declines of 2.9% in 2023 and 4.1% in 2022. However, the ONS noted that sales have yet to return to 2022 levels.
Optimism for 2025
Capital Economics’ Alex Kerr acknowledged the economic struggles at the close of 2024 but expressed optimism for 2025. “With real incomes growing, the retail sector is likely to see better performance in the coming year,” Kerr said.
Conclusion
The unexpected drop in UK retail sales in December highlights ongoing challenges, particularly in food retail. However, signs of recovery in non-food and online sales, coupled with positive economic forecasts, suggest potential growth for the sector in 2025.
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