Retail sales volumes down by 3.2% as Christmas shoppers shift spend

British retailers saw the volume of goods sold last month drop by its fastest rate in three years as under-pressure shoppers shifted part of their Christmas shop to earlier in the year to spread the cost and take advantage of discounts.

Sales volumes dipped by 3.2% in December, data from the Office for National Statistics (ONS) suggested on Friday, down from a rise of 1.4% a month before.

The ONS said that there was some evidence that customers had done more Christmas shopping than usual in November, taking advantage of Black Friday sales in some cases.

This meant that December saw the biggest drop in sales for the retail sector since January 2021, when the country was still under Covid-19 restrictions.

It was also much worse than the 0.5% drop that economists had forecast on average, according to estimates supplied by Pantheon Macroeconomics.

The value of the items that customers bought also dropped, by 3.6%, the ONS said.

“Following a strong November, retail sales plummeted in December with all types of outlets being hit,” said the ONS’s Heather Bovill.

“This was the largest overall monthly fall since January 2021, when the reintroduction of pandemic restrictions knocked sales heavily.

“Food stores performed very poorly, with their steepest fall since May 2021 as early Christmas shopping led to slow December sales.”

Food shops saw their sales volumes down by 3.1% while sales in non-food shops were 3.9% lower.

Worst hit were the department stores, whose sales dropped 7.1% in a very quiet December period.

Food store sales volumes fell by 3.1% in December 2023, from an increase of 1.1% in November 2023.

Bovill added: “Department stores, clothing shops and household goods retailers reported sluggish sales too as consumers spent less on Christmas gifts, but had also purchased earlier during Black Friday promotions, to help spread the cost.

Analyst reaction

EY Retail Lead for UK and Ireland, Silvia Rindone

"The longer-term picture remains subdued, with quarterly sales dipping, while annual sales volumes fell for the second consecutive year, to their lowest level in five years.

“Although Christmas 2023 may not have yielded the sales retailers were hoping for, there are reasons to be optimistic as we enter 2024.

“Real wages are set to grow again as inflation continues to fall, energy prices remain stable and interest rates are likely to have peaked for the time being, all of which could lead to increased consumer spending.

“Non-food retailers who have taken the time to understand their customers’ priorities and evolve their proposition are reaping the benefits and standing out from the crowd.

“This is not an easy process and many retailers are still struggling.”

Deloitte Head of Retail, Oliver Vernon-Harcourt

“December’s retail sales results are well below what retailers would have been expecting in what is typically the biggest shopping month of the year. This significant drop sees sales fall to the lowest level since January 2021, which will be a significant blow to retailers across all categories. This paints a challenging picture for retail in the near future, in a sign that cautious consumers are feeling the long-term effects of a strain on their spending power.

“2024 may be a tale of two halves, with mortgage rates set to rise further and inflation continuing to fluctuate. The first half of the year will remain challenging for consumers, whose spending is hindered by rising rates and economic uncertainty. However, the second half could be a more positive story, with the impacts of wage increases, reduced national insurance and falling inflation felt more widely by consumers.

“Despite this varied outlook, retailers will want to capitalise on improving consumer confidence, with many looking to attract customers by investing in hybrid experiences across in-store and online. Likewise, many will continue to invest in both premium and value products, as well as targeted product lines that cater to a diverse range of consumers.”

Wealth Club, Manager of the Quality Shares Portfolio, Charlie Huggins

"Retail sales volumes ended the year on a sour note, registering the largest monthly decline since January 2021.

"Partly, this is because UK consumers did their Christmas shopping early this year. Nevertheless, December's decrease was much worse than expected and suggests pressure on the UK consumer may be intensifying.

"Results from retailers themselves over Christmas paint a very mixed picture. The supermarkets fared reasonably well, as did Next and M&S. But sales from the likes of JD Sports and Superdry have been very disappointing. This suggests UK consumers are becoming more choosy about where to spend their money.

"Whether December's weak retail sales are a blip or the start of a more worrying trend remains to be seen. But one thing's for sure  - despite optimism around interest rate cuts, the UK economy certainly isn't out of the woods."