Retail sales rise in November as consumer weakness weighs

Retail sales saw a weaker-than-expected recovery last month, following a significant decline in clothing and online purchases.

The volume of goods purchased across the country increased by 0.2 per cent in the four weeks to November 23, according to the Office for National Statistics (ONS).

Although this was an improvement on the 0.7 percent drop in October, a Reuters poll of economists had forecast a 0.5 percent rise.

E-commerce spending fell 4.3 percent, the biggest contraction since March 2022, while the share of online sales fell 1.3 percentage points to 26.2 percent.

Clothing store sales were down 2.6 per cent, with the ONS saying “economic factors” were affecting demand.

Consumer confidence has remained subdued following the late October Budget, in which Chancellor Rachel Reeves announced increases to National Insurance rates and the National Living Wage.

The Bank of England and many retailers have since warned that the measures will cause price increases and stoke inflation, reducing the short-term chances of an interest rate cut.

However, the ONS reported that food store sales volumes rose by 0.5 per cent, the first increase in three months, thanks to strong supermarket trading.

Purchases at home goods stores also grew by 1.1 percent thanks to strong trade at furniture stores.

The reporting period covered the half-term holidays but not Black Friday, which was on November 29, but the ONS said some retailers noted that sales “started well before” that day.

Jacqui Baker, retail director at RSM UK, said: ‘Black Friday is a crucial event for the sector; Its performance determines how much retailers will have to discount in December and, for many, it may be the savior of the month.

“December will be the last opportunity for retailers to get out as much stock as possible before the next quarter, a typically slower period when consumers choose to hold on and save, rather than splurge.”

The ONS retail sales figures come a day after the Bank of England kept the UK base rate at 4.75 per cent and warned of zero growth in the final quarter of this year.

Interest rates gradually increased from a record low of 0.1 percent to 5.25 percent between the end of 2021 and the summer of 2023 in response to skyrocketing energy prices and the easing of restrictions related to Covid that drove inflation.

While the country’s inflation rate subsequently declined, it rose to 2.6 percent in the 12 months to November, driven by higher prices for fuel, clothing and concert tickets.

Earlier in the week, the ONS revealed that UK wage growth accelerated to 5.2 per cent in October following a strong rise in wages for skilled manufacturing staff.

Danni Hewson, head of financial analysis at AJ Bell, said: “After those years of lockdown and the last two years since rising prices and interest rates forced us all to rein in our spending, this year things They feel a little different.”

‘People have a little more money in their pockets thanks to those higher-than-inflation pay rises, and they’re more than willing to leave the blues behind, even if it’s just for a few fun-filled holidays.

“But budgets will continue to be closely watched, because recent years have made us acutely aware that we can only spend a pound once, and that pound can’t buy as much as it used to.”