UK retail sales dip as Omicron fears keep shoppers at home

Bloomberg

UK retail sales plummeted in December as the spread of the Omicron variant kept shoppers at home.
The volume of goods sold in stores and online fell 3.7% from November, the biggest drop since January 2021’s lockdown, the Office for National Statistics said Friday. Economists had expected a decrease of 0.6%. Sales excluding auto fuel declined 3.6%.
The figures highlight the impact the new variant of coronavirus had on consumer spending. While restrictions to control its spread have since been lifted, there are concerns higher inflation, interest rates and taxes will squeeze consumer incomes in 2022, reducing their spending power.
Even so, the sales data are likely to have little bearing on the Bank of England’s February decision, with economists increasingly certain officials will hike rates again in an effort to control inflation. On Friday, Bloomberg Economics said it too expects a move on February 3, three months earlier than it previously predicted.
Market bets held steady after the data, with investors almost fully pricing in a 25 basis-point increase in the BOE benchmark rate to 0.5%.
The decrease in sales last month was driven by a 7.1% drop in sales at non-food stores, while fuel sales fell 4.7% as home working reduced travel. Shoppers also increasingly turned to the internet, with the proportion of retail sales online rising to 26.6% from 26.3% in November. The figure was 19.7% before the pandemic.
“The rapid emergence of the omicron variant in December triggered a mass anxiety among shoppers, with the risk of missing out on Christmas plans outweighing the appeal of a trip to the shops,” said Lynda Petherick, head of retail at Accenture UKI. “Despite the drop potentially being attributed to sales having been brought forward into October and November as shoppers locked in purchases early, this will be scant consolation for retailers. They will be bitterly disappointed that they couldn’t capitalise on one of the most important months in the retail calendar.”
The reading left sales down 0.2% in the final quarter of 2021, despite a strong October and November. On an annual basis, sales volumes were 5.1% higher than in 2020, the strongest growth 2004.
Still, more pain for retailers may lie ahead. A separate report Friday showed UK consumer confidence fell in January to depths last seen during the early months of lockdown in 2021 as cost-of-living crisis took over from the pandemic as a prime concern.