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ONS reports drop in retail sales volumes for December

Retailers suffered a worse Christmas than previously feared after official figures today showed a surprise drop in volumes in December.

The Office for National Statistics (ONS) said retail sales volumes fell 0.1% between November and December, after economists predicted a return to growth of 0.2%. It will fuel fears that the economy contracted at the end of last year.

There were further signs that shoppers shunned the high street with the figures showing that non-store retailing volumes grew 1.6% month on month, and accounted for 10.6% of all retail sales in December.

Household goods, including electrical appliances, furniture, hardware and music and video recordings, showed the sharpest month-on-month drop with a decline of 3% - the biggest fall since January 2010.

But it was a better festive period for department stores, which saw volumes grow 0.4% month on month.

Clothes and shoe shops were the only other sector to fare better in December, posting a rise of 0.7%.

With inflation nearing 3% in December, retailers will have suffered as sales values also declined 0.1% month on month and by 0.3%, excluding fuel.

Today's figures come after a lacklustre performance in November, when sales were flat after a shock 0.8% drop in volumes in October.

Vicky Redwood, chief UK economist at Capital Economics, said the 0.6% overall decline in the final three months of the year was yet more evidence that the economy probably contracted at the end of last year.

Howard Archer, chief European and UK economist at IHS Global, said: "The problem that retailers - and the economy in general - face is that consumers' purchasing power has come under some renewed pressure after seeing appreciable improvement over the first three quarters of 2012.

"Inflation moved back up in late 2012 while earnings growth appeared to falter."

The Office for National Statistics said that retailers' internet sales helped to boost overall sales and provided a much greater proportion of business in December than they were expecting.

This has increased the pressure on the high street, where HMV, Jessops and Blockbuster UK have all gone into administration this month.

Peter Saville, partner at advisory and restructuring firm Zolfo Cooper, said: "Today's figures show a disappointing end to a tough year for many retailers. While 2013 appears to be heading in a similar direction, with the likes of Jessops, HMV and Blockbuster being the first to fall victim, the fact that many, including John Lewis, Dixons and Asos, are still performing well means that all is not lost."

Source : Annabelle Dickson - The Independent

18 January 2013
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