PwC comments on Dec 2023 retail sales figures

Lisa Hooker, PwC UK Leader of Industry for Consumer Markets, comments on the December 2023 ONS Retail Sales figures:

"In the midst of an on-going cost-of-living crisis, and after better-than-expected November results, helped by an earlier start to Black Friday sales, it’s perhaps no surprise that December’s retail sales disappointed. Total sales over the critical run-up to Christmas fell by 2.1% in volume terms compared with last year excluding petrol, while pounds in the till increased by only 2.3% which is far lower than the headline rate of inflation.

However, the scale of the decline will have surprised many, with retail sales volumes now falling well below pre-pandemic levels. In fact, volumes hit their lowest level since May 2020, right in the middle of the first nationwide lockdown of the pandemic.

There were volume declines in every category of non-grocery, with a combination of shoppers being more considered with their discretionary spending, buying earlier during Black Friday sales. There were also fewer large family gatherings reducing the number of gifts being bought overall.  We reined back on areas such as toys, sports equipment, watches and jewellery, while fashion was one of the least affected categories.

Perhaps surprisingly, even grocery volumes declined, albeit masked in retailer trading results by the 8.0% inflation announced earlier in the week. And while the smallest decline appears to have been in online shopping, this was partly because last year’s online sales were hampered by postal strikes that caused knock-on delays to other parcel carriers.

The contrast between these figures and the better reported sales announced by several large retailers this month is stark, albeit those numbers will have represented pounds in the till including the impact of inflation, and over a longer time period - including November in most cases. However, this suggests that there may be bad news still to be reported by retailers that have yet to announce their Christmas trading.

Despite easing inflation, rising wages and the recent National Insurance cut, retailers have already talked about a slow start to 2024, as shoppers remain cautious about spending. So, while the prospects for the sector may improve later in the year, it may be a case of battening down the hatches for the early months of the new year."