New data from the Office for National Statistics revealed that retail sales volumes fell by an estimated 3.2% in December 2023, from a rise of 1.4% in November 2023 (revised up from an increase of 1.3%).
December’s decrease was the largest monthly fall since January 2021, when coronavirus (COVID-19) restrictions affected sales.
Looking at the quarterly picture, sales volumes fell by 0.9% in the three months to December 2023 when compared with the previous three months.
Non-food store sales volumes fell by 3.9% in December 2023, following a 2.7% increase in November 2023 when earlier Black Friday sales, and wider discounting, increased sales.
Food store sales volumes fell by 3.1% in December 2023, from an increase of 1.1% in November 2023.
Non-store retailing (predominantly online retailers) sales volumes fell by 2.1% in December 2023, following a fall of 1.1% in November 2023.
In light of this, Newspage asked financial services experts whether this dire data could give the Bank of England pause for thought after yesterday’s unexpected uptick in inflation, how it might impact swap rates and, based on the level of the fall, whether a cut in the base rate come sooner than we thought only yesterday to stimulate the ailing economy?
Reaction
Justin Moy, managing director at EHF Mortgages:
“If there was any doubt about the state of our economy, this appalling data has removed it.
“The economy is hanging on by a thread. These figures highlight the plight of both consumers and the hundreds of thousands of retail businesses that are under frankly relentless pressure.
“Whilst this is terrible news, the only positive is that this should encourage the Bank of England to cut rates sooner, and that will likely apply downward pressure on swap rates to fall, reducing mortgage costs overall.
“Recovery is urgently needed and the Bank of England need to react quickly.”
Elliott Culley, director at Switch Mortgage Finance:
“The bleak December figures reveal what we have all known for a while, namely that the economy is in a seriously bad way.
“Income is being stretched to breaking point and the Bank of England needs to think carefully on how to respond and not be blinded by a slight uptick in inflation earlier this week.
“Our economy is in disarray and the Bank of England appears blind to it.”
Rohit Kohli, director at The Mortgage Stop:
“These figures paint a concerning picture for the UK economy, signalling that a full recovery remains elusive.
“With retail sales volumes plummeting by 3.2% in December, the largest monthly fall since January 2021, it’s evident that consumer confidence is near zero.
“This downturn, coupled with the Bank of England’s recent data showing an increase in defaults, suggests that financial caution is becoming more prevalent across the nation.
“This trend has significant implications. Retailers, already under strain, face further challenges as declining sales threaten both jobs and growth prospects.
“It’s a clear indicator that the economic landscape is highly unstable and that recovery is more complex than anticipated.
“The Bank of England’s focus on inflation, while crucial, needs to be balanced with a broader perspective on economic health.
“Ignoring these multifaceted economic signals could lead to a challenging 2024 for many in the UK.
“It’s vital that monetary policy reflects this wider context.”
Peter Stamford, mortgage expert at The Mortgage Uni:
“This bleak data shows the immense pressure households and the UK’s retailers are under as higher interest rates and inflation take money out of people’s pockets.
“While this is shocking news for the high street, every cloud has a silver lining and this dire data could indicate we’re back on track for a base rate cut this spring, which will ease the pressure on borrowers.”
Gary Bush, financial adviser at MortgageShop.com:
“December’s retail sales didn’t really come as a surprise.
“It seems that the Black Friday initiative has convinced shoppers to go early with their Christmas spending spree, which was witnessed in the increase in trade figure for November.
“For anyone venturing out into the high streets and retail parks in December, things were eerily quiet with some suggesting ghost towns.
“The state of the UK is mimicking a pendulum at the moment swinging from one set of macroeconomic figures to another.
“The Bank of England meeting on 1 February will see a further base rate hold and then a cut could come not long after as this data shows how fragile the economy is.”
Ranald Mitchell, director at Charwin Private Clients:
“This is shocking data today from what you’d expect to be the most buoyant time of the year for retail.
“The effects of the cost-of-living crisis, rising mortgage costs and struggling households are all filtering through and taking their toll on retailers.
“The notion of the base rate being higher for longer is far more damaging than perhaps expected.
“A rate drop in Q1 seems far more likely now and would provide some much-needed breathing space for everyone, whilst continuing the pursuit of the 2% inflation target.”
Imran Hussain, director at Harmony Financial Services:
“Anyone who wasn’t sure of the disastrous state the UK economy is in now knows.
“Families across the UK are struggling with inflation and higher interest rates and we have to now hope for a base rate cut from the Bank of England by the spring.
“Failure to cut could have brutal consequences for millions of borrowers and small retail businesses.”
Michelle Lawson, director at Lawson Financial:
“If this isn’t a warning shot across the bows of the economy then I don’t know what is.
“Despite yesterday’s slight increase in inflation, the base rate needs to come down otherwise the high street could be decimated.
“With the upcoming mooted tax cuts in the Budget, the focus needs to be on getting people spending again and to do this Threadneedle Street and the Government need to put money in people’s pockets.
“The figures on secured and unsecured loan defaults released yesterday shows the constant squeeze households are under.
“The high street cannot wait until the second quarter or beyond for a but in the base rate.”
Katy Eatenton, mortgage & protection specialist at Lifetime Wealth Management:
“This isn’t great reading, and you have to feel for the UK’s beleaguered retailers.
“They have been under the cosh since the pandemic and the pressure is unrelenting.
“The only positive from this data is that it may result in a cut in the base rate sooner than expected as we are now firmly on red alert.
“Fingers crossed this will push swap rates down further and reignite the mortgage rate war between lenders that only yesterday we were expecting to taper off.”
Ben Perks, managing director at Orchard Financial Advisers:
“The belt tightening hit new heights in December based on this evidence.
“Many consumers are simply spent out after years of pain.
“First Covid and then rising interest rates and the cost-of-living crisis have pummelled the high street.
“In the run up to Christmas we would usually expect a sharp increase in retail sales but this wasn’t the case, with a 0.9% quarterly drop. which means buyers have either gone without or spread the cost of the festive season throughout the year.
“Either way, it’s concerning to see, and the Bank of England will surely take note. This could be a boost for borrowers as the Bank of England cannot ignore how bad this data is out.”
Rob Gill, managing director at Altura Mortgage Finance:
“These dire retail figures serve as a reminder that UK consumers remain under pressure from the cost-of-living crisis and rising interest rates.
“With the Pound having sold off as an immediate consequence of these figures, expectations of a cut in base rate will no doubt be brought forward.”
Charles Breen, founder at Montgomery Financial:
“These numbers make for terrible reading, but simply reinforce what all of us saw with our own eyes when we went Christmas shopping.
“The shops were noticeably quieter, and this decrease reflects it. If the Bank of England doesn’t heed this as a warning that the economy is drifting towards serious trouble, then it proves how out of touch they are.
“The base rate needs to come down now. If the base rate is not cut shortly borrowers, especially mortgage borrowers, will not be able to cope much longer with this sustained attack from the Bank of England.
“If rates don’t come down soon, I won’t be the only one calling for Andrew Bailey to lose his job, I will be joined by every mortgage holder in the country.”
Samuel Mather-Holgate, independent financial adviser at Mather and Murray Financial:
“Christmas is the jewel in the crown of retailing and these figures are an abdication from the sector.
“Declines in every section of the figures; food, non-food and online, draws an obvious conclusion that the economy is weaker than thought.
“There will be many casualties in this weak data, some who are still holding on, trying to offload excess stock.
“However, if things don’t improve by Spring there will be many vacant premises on the high street.
“The high street has just hit a new low. You have to feel for the nation’s retailers.”
Graham Cox, founder at Self Employed Mortgage Hub commented:
“These results show how much pre-Christmas spending is skewed by November’s Black Friday, bringing forward sales.
“But there’s also no denying how much people’s incomes are being squeezed, 3.2% is a huge drop in sales.
“The case for a cut in interest rates is becoming overwhelming, something has to give.”
