UK retail sales fall 0.2% in fourth quarter - ONS
By Oliver Haill
Date: Friday 18 Jan 2019
(Sharecast News) - UK retail sales weakened much more than expected at the end of last year, official figures revealed on Friday.
December retail sales excluding fuel fell 1.3% month-on-month, the Office for National Statistics said, worse than the 0.8% decline predicted by economists. Compared to December last year, sales were up 2.6%, versus the average forecast of 3.8%.
A sharp 2.3% monthly decline in sales for non-food shops was the key element to December's slide, driven by lower household goods sales.
The retail sales deflator had plummeted to just 0.6% in December from 1.3% the month before.
November's growth was also revised down by the ONS, with the monthly rate cut to 1% from 1.2% and the year-on-year trimmed to 3.5% from 3.8%. Economists noted that for the past four years, every estimate of monthly growth in November has been revised down over time, while every December estimate has later been revised up.
Averaging out growth for November and December to reduce the volatility associated with Black Friday and Christmas, sales grew by 0.3% on the month, in line with the average for 2018 as a whole. Quarter-on-quarter, growth was down 0.2%.
Including fuel, retail sales were down 0.9% on the month and up 3% on the year, both undershooting market expectations and with the previous months figures also revised down.
Rhian Murphy, ONS head of retail sales, said: "Retail sales fell back slightly in the last three months of 2018 with only petrol stations seeing significant growth.
"Following the increased growth in November, where shoppers snapped up more Black Friday offers as they continue to bring forward their Christmas shopping, retail sales weakened in December."
Quarterly growth down 0.2% was in line with forecasts of total consumer spending growth falling to 0.3% in the fourth quarter, said economist Thomas Pugh at Capital Economics.
He said the fall in non-food sales was mostly due to the unwinding of the Black Friday boost - "but it could also be evidence that Brexit uncertainty is starting to weigh on consumer spending" and was anyway partially offset by an increase in the volume of fuel sold as fuel prices continued to fall.
"With inflation continuing to fall back - note that the retail sales deflator plunged from 1.3% in November to just 0.6% - and pay growth on the up, there should be scope for consumer spending growth to gather some momentum further ahead once a Brexit deal has been finalised."
Sam Tombs at Pantheon Macroeconomics said December's decline largely reflects the seasonal adjustment process failing to update fully for the new pattern of spending generated by Black Friday, which has dragged more pre-Christmas shopping forward to November.
Looking through the volatility in the numbers, Tombs said it was "clear that retailers have had a tough start to the year", with quarter-on-quarter sales volumes down 0.2%. "That drop is not unprecedented - volumes fell by 0.3% in Q1- and it follows two quarters of strong growth, but it nonetheless suggests that consumers have tightened their purse strings amid rising concerns about Brexit."
With consumer spending surveys showing significant deterioration in the fourth quarter, this suggests the story is one of overall weakness, Tombs added, which could pick up quickly this year if inflation falls further and if politicians make progress on Brexit. "But that relief may come too late to save some traditional high street retailers whose finances are under severe pressure from both near-term weakness in consumers' spending and the continued shift in spending online."
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