ONS Data Shows Retail Sales Fell In December

The ONS has published retail sales data for December 2022, covering the period 27 November to 31 December 2022. Cyber Monday was on 28 November.

Main points:

• Retail sales volumes are estimated to have fallen by 1.0% in December 2022, following a fall of 0.5% in November (revised from a fall of 0.4%). This continues a broad downward trend that has been seen since the lifting of hospitality restrictions in summer 2021.

• Sales volumes were 1.7% below their pre-coronavirus (COVID-19) February levels.

• Non-food stores sales volumes fell by 2.1% over the month, with continued feedback from retailers and other wider evidence that consumers are cutting back on spending because of increased prices and affordability concerns. The fall in non-food stores sales volume was the largest contributor to the fall in overall retail sales volumes.

• The proportion of online sales fell to 25.4% in December 2022 from 25.9% in November, with anecdotal evidence that Royal Mail strikes led to consumers shopping in stores more.

• Between 2021 and 2022, retail sales volumes fell by 3.0%, as the lifting of restrictions on hospitality led to a return to eating out, and rising prices and the cost of living affected sales volumes.

Commentary

Responding to the latest ONS Retail Sales Index figures, Helen Dickinson, Chief Executive of the British Retail Consortium, said:

“Volumes fell for the ninth consecutive month as the cost of living squeeze caused consumers to rein in December spending. The high cost of household bills, particularly for energy, and rising food inflation, made for a difficult Christmas backdrop with falling consumer confidence. Nonetheless, increased discounting helped boost gift giving, with stronger sales growth for clothing and furniture.

“It is clear that inflation took its toll on the whole of 2022, with retail volumes falling 3.4% over the year, the biggest drop on record*. Many of the cost pressures bearing down on retailers and their customers remain in 2023, with high energy costs, the war in Ukraine, and domestic labour shortages all taking their toll. However, BRC modelling suggests the situation will improve in the second half of the year.”

*For 2022 as a whole, sales by value rose 4.8%, while volumes fell 3.4%. These annual records began in 1989.

Commenting on the Office of National Statistics retail sales index for December 2022, Lisa Hooker of PwC said: 

“While not as large a decline as we saw in November’s figures, the headline 1% decline in retail sales volumes for December comes in stark contrast to the generally better-than-expected trading results announced by retailers earlier this month.

In fact, while sales volumes have in fact fallen by 6% compared with December 2021, pounds in the till increased by over 3% (excluding petrol). This underlines the fact that, even accounting for the slight easing of inflation reported earlier this week, shoppers are simply spending more to get less for their money.

Trading performance of high street retailers partly exceeded expectations as consumers shopped later for their Christmas presents and were concerned by disruption to parcel deliveries from online retailers.

The proportion of sales accounted for by online retailers fell to their lowest level since the start of the pandemic, at just 25.4%, compared with a peak of almost 40% at the height of the lockdowns. This was also reflected in the disappointing performance of purely online retailers over the festive period. 

Amongst the better performing categories, grocery sales were more resilient as consumers protected their Christmas dinners, being the first normal family gatherings uninterrupted by pandemic restrictions in three years. Meanwhile clothing also outperformed, with volumes increasing by 1% as the cold snap - and desire to dress up - encouraged shoppers to buy more seasonal winter clothing and festive outfits.

As we come into the New Year, there are already signs that the festive momentum is beginning to slow down. With real household incomes facing their sharpest decline in two generations, some consumers will have had to borrow on credit cards or use ‘buy now pay later’ in order to fund their festive celebrations. Combined with continued double digit inflation in essentials, forthcoming tax increases and rise in the Energy Price Guarantee cap, the risk is that shoppers will simply have less money to spend on discretionary purchases in the coming months. Retailers and leisure operators will be hoping that the slowdown is short-lived and that inflation eases later in the year."

Source : ONS, BRC and PwC

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