British consumers are tightening their belts as business activity contracted for the fifth consecutive month, according to new data that suggest the economy has entered a prolonged recession.
The volume of retail sales in Great Britain fell 0.4 per cent between October and November, according to figures published by the Office for National Statistics on Friday. Economists polled by Reuters had expected a 0.3 per cent increase.
Meanwhile, a closely watched monitor of the health of the private sector, the S&P Global’s flash UK composite purchasing managers’ index, or PMI, rose to 49 in December from 48.2 in November.
Despite the uptick, the reading was below 50 for the fifth month in a row, indicating that a majority of businesses had reported a contraction.
The data fuel concerns that the economy has already entered a long recession. Gross domestic product fell in the third quarter, with a further decline expected in the fourth quarter.
Chris Williamson, chief business economist at S&P Global Market Intelligence, which compiles the PMI, said that the December data “add to the likelihood that the UK is in recession,” with the PMI pointing to a 0.3 per cent GDP contraction in the final three months of the year.
Thomas Pugh, economist at consulting company RSM UK, said: “The big picture is that the UK is almost certainly in a recession that we expect to last until the third quarter 2023 and that results in a drop in GDP of around 2 per cent.”
Separate data by the research company GfK showed that UK consumer confidence remained below minus 40 for the eighth month in a row in December, marking the longest period of pessimism in a near half-century.
Retail sales volumes were pulled down by a 2.8 per cent fall in online shopping. Darren Morgan, ONS director of economic statistics, said that Black Friday shopping holiday offers had failed “to provide their usual lift in this sector”.
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Purchases of non-food items and fuel also dropped, with only food sales showing an increase from October to November. Morgan said that consumers were “stocking up early to try to spread the cost of Christmas festivities”.
Lynda Petherick, retail lead at Accenture UK, said the data “will come as a major disappointment to retailers”, after the World Cup and Black Friday failed to produce a significant bump in sales.
Consumer inflation eased slightly to 10.7 per cent last month from a 41-year high of 11.1 per cent in October.
The PMI also showed the first reduction in workers’ headcounts since February 2021. External demand also remained subdued in December, with overall new export orders falling for the sixth month running, according to the survey.
The downturn in exports was driven by the manufacturing sector, with the relative index dropping by close to two points to 44.7, its lowest level since May 2020.
Source: Economy - ft.com
