Retailers faced a tough Christmas as rising sales values caused by inflation masked ongoing woes in the sector.
The latest British Retail Consortium (BRC)-KPMG Retail Sales Monitor showed total sales increased by 6.9% in December against an increase of 2.1% in December 2021 – well above the three-month average growth of 4.4% and 12-month average growth of 3.1%.
UK retail sales increased 6.5% on a like-for-like basis from December 2021, when they had increased by 0.6%.
But that rise in sales masked a significant drop in volumes when historically record levels of inflation are taken into account.
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The research showed shoppers swerved expensive technology purchases in December, opting instead for energy efficient household appliances as well as more typical festive purchases of clothes and beauty items. Food sales also grew almost 8% year-on-year.
Across last year overall, total UK retail sales increased by 3.1% on 2021, while food growth reached 3% and non-food growth hit 3.2%.
Paul Martin, UK head of retail at KPMG, said: “Whilst the numbers for sales growth in December look healthy, with sales values up by nearly 7% on last year, this is largely due to goods costing more and masks the fact that the volume of goods that people are buying is significantly down on this time last year.
“With Christmas behind us, retailers are facing a challenging few months as consumers manage rising interest rates and energy prices by reducing their non-essential spending, and industrial action across a number of sectors could also impact sales.”
BRC chief executive Helen Dickinson said: “After an exceptionally challenging year which saw inflation climb and consumer confidence plummet, the uptick in spending over Christmas gave many retailers cause for cheer.
“Nonetheless, despite the stronger sales, growth remained below inflation, making December the ninth consecutive month of falling volumes.
“Retail faces further headwinds in 2023. Cost pressures show little immediate signs of waning, and consumer spending will be further constrained by increasing living costs.”
Elsewhere, figures from Barclays showed consumer card spending grew 4.4% year-on-year in December. That was slightly higher than in November (3.9%), but well below the 9.3% rise in consumer price inflation.
Esme Harwood, director at Barclays, said: “The retail, travel and hospitality sectors all saw noticeable growth in December. Sports and outdoor retailers saw their largest increase since March 2022 as many Brits sought to get a head start on their January health kick. Meanwhile, pubs, bars and clubs benefited from Christmas parties and football fans watching the World Cup.
“However, it’s worth noting that these figures look more positive in comparison to December 2021, as the spread of Omicron kept Brits away from high streets and hospitality venues. It seems this year shoppers returned to the high street to make the most of the festive period despite the cost-of-living challenges.”
