UK retail sales rose less than expected in December as shoppers preparing for a pandemic-hit Christmas eschewed spending significant amounts.
The volume of sales by value climbed just 0.3 per cent in December from the previous month, even though shops reopened across England following a November lockdown, according to data published by the Office for National Statistics on Friday.
The data confirmed that the 1.9 per cent fall in 2020 was the biggest since records began in 1997.
The monthly figure was lower than the 1.2 per cent increase forecast by economists in a Reuters poll after most Christmas festivities were curtailed. It follows a revised down 4.1 per cent contraction in November, when sales were limited by coronavirus restrictions in all parts of the country.
Helen Dickinson, chief executive of the British Retail Consortium, said: “There was no Christmas cheer for retail as the industry found itself in the firing line for last-minute coronavirus restrictions”.
Separate data released on Friday showed that the UK’s public finances continued to deteriorate in December as prolonged and tighter restrictions led to falling revenues and rising spending.
Howard Archer, chief economic adviser to the EY Item Club, said: “The slight fall in retail sales over Q4 is consistent with our view that the economy likely stagnated over the quarter, just avoiding contraction.”
Jonathan Athow, deputy national statistician for economic statistics at the ONS, said: “December’s retail sales increased slightly, driven by an improved month for clothing sales, as the easing of some lockdown measures for parts of the month meant more stores were able to open.”
However, clothing stores remained one of the most affected sectors, with sales down by one quarter over the year as people were stuck at home and most social events were cancelled.
Online retailing rose by nearly 50 per cent in 2020, the highest annual growth since 2008, with food retailers reporting a growth rate of nearly double that.
Retail sales did however rise year-on-year in December, climbing 2.9 per cent from the same month in 2019 in part because the public switched from consuming services in restaurants and bars to buying goods such as food and drink.
The public finances weakened in December as the government had to borrow £33.4bn to cover the gap between its spending and revenues — its so-called cash requirement.
That brought the total figure for the first nine months of the financial year to £318.1bn, nearly double the highest cash requirement in any other April-to-December period since records began in 1984, separate ONS data showed.
With government spending soaring due to support schemes for businesses and workers and tax revenues falling, public sector net debt rose to 99.4 per cent of gross domestic product in the fiscal year to November, the highest since 1962.
Charlie McCurdy, researcher at the Resolution Foundation think-tank, said: “This level of spending may be eye-wateringly large, but it is absolutely necessary in order to both tackle the virus, and protect families and firms from the crisis.”
In the financial year to December, cash receipts fell by 13 per cent compared with the same period last year, with value added tax receipts dropping by more than one-third. In contrast, public spending rose by 40 per cent.
Chancellor Rishi Sunak said the government had invested more than £280bn to protect jobs and livelihoods across the UK during the pandemic, and he warned that “once our economy begins to recover, we should look to return the public finances to a more sustainable footing”.
Economists expect consumer spending and the public finances to deteriorate further in January as the economy continues to suffer from the latest lockdowns.
Thomas Pugh, UK economist at the consultancy Capital Economics, said that December’s jump in borrowing “is likely to set the tone for the next few months as the third Covid-19 lockdown keeps many businesses closed and will only increase talk of how to pay for the crisis”.
Samuel Tombs, chief UK economist at the consultancy Pantheon Macroeconomics, forecast that retail sales would fall 5 per cent month on month in January.
Source: Economy - ft.com
