Drop in sales volumes underlines difficult trading that has seen administrators called in to Jessops, HMV and Blockbuster
Fears that Britain is heading for a triple-dip recession intensified on Friday amid news of a poor Christmas for retailers and concerns that heavy snow will lead to an economic shutdown over the coming days.
City analysts pencilled in a small fall in national output for the final quarter of 2012 after the release of official data showing the volume of retail sales dipped by 0.1% between November and December, and by 0.6% between the third and fourth quarters of 2012.
But there was also speculation that the arctic weather gripping much of the UK would result in a repeat of the closed factories and empty shopping malls of late 2010, which then contributed to a temporary plunge in activity.
“Given the UK’s ability to grind to a halt with even a flake, the snow has come at a very brittle time for the UK economy, adding to the headwinds that it is already battling against as it tries to avoid a triple-dip recession,” said Howard Archer of IHS Global Insight. “The longer the snow and freezing conditions last, the greater will be the disruption to economic activity, and the bigger the risk that the first quarter of 2013 will see contraction in GDP following a likely renewed modest dip in the fourth quarter of 2012.”
Two quarters of consecutive declines in GDP would be needed for an unprecedented triple-dip recession, but the City was put on alert following data released by the Office for National Statistics showing a poor trading performance by retailers in the busiest shopping month of the year.
Nick Parsons, head of strategy for National Australia Bank, said: “We’re looking for a -0.4% drop in GDP when the quarter four 2012 figures are published next week. The biggest threat to the first quarter of 2013 and the possibility of a triple-dip recession would be for a decent dump of snow to bring the UK economy grinding to a halt. Which is exactly what we’ve got.”
The seasonally adjusted drop in high-street and online retail activity followed a flat November and underlined the difficult trading conditions that have seen administrators called in to Jessops, HMV and Blockbuster within the past 10 days. Supermarkets, department stores and shops selling household goods all struggled, but discounting appeared to help clothing and footwear outlets.
Although some stores reported a last-minute rush just before Christmas, the ONS data suggests hard-pressed consumers kept a tight rein on their spending. The figures, which cover the period until 29 December, show the boost to spending provided by the London Olympics proved to be shortlived, with activity in December barely higher than it was a year earlier and only 1.2% higher than when the recession was at its worst in 2009.
Only strong sales of petrol following a fall in pump prices prevented a bigger monthly decline, the ONS said. Excluding fuel, there was a 0.3% reduction in retail sales in December.
The ONS said online shopping made up an increasing share of retail sales, with more than 10% of the total accounted for by consumers using the internet, an increase of 1.2 percentage points on December 2011.
Vicky Redwood, UK analyst at Capital Economics, said: “December’s drop in the official measure of UK retail sales volumes confirms the festive period was fairly lacklustre for the high street.”
Jeremy Cook, chief economist at foreign exchange company World First, said: “With the number of big high street names heading into administration in the past few weeks, we already knew this Christmas was not a kind one for the retail industry. Food and energy price inflation have hammered consumers’ pockets and, apart from December 2010 (a very snowy month), this annual increase of 1.1% was the weakest since 1998.
“Sterling has come in for an absolute pasting in the past 24 hours, as investors positioned themselves for [these] retail sales numbers.”