Christmas boosts sales but masks nervous festive season for consumers

The increased cost of goods saw Christmas retail sales values up almost 7% on last December, masking a nervous festive season for consumers, figures show.

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%, according to the British Retail Consortium (BRC)-KPMG Retail Sales Monitor.

UK retail sales increased 6.5% on a like-for-like basis from December 2021, when they had increased by 0.6%.

However, the rise in sales masked a significant drop in volumes considering historically record inflation.

Consumers shunned big ticket technology purchases in December, opting for energy efficient household appliances and Christmas mainstays of clothes and beauty items.

Food sales were also strong, growing nearly 8% year-on-year as families gathered at home to make the most of an unrestricted Christmas.

Despite the bad weather, and with postal strikes ongoing, shoppers opted to head for the high street to browse for Christmas presents, with online sales growth continuing to slide across a number of categories.

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%.

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.”

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.”

Meanwhile, figures from Barclays show consumer card spending grew 4.4% year-on-year in December – slightly higher than in November (3.9%), but well below the 9.3% rise in consumer price inflation.

Hospitality and travel received a boost from Christmas parties, the football World Cup and 2023 holiday bookings, while the cold snap saw spending on utilities climb even higher, and postal strikes hampered online retail, meaning shoppers headed to the high street for last-minute gifts.

Data from Barclays, which sees nearly half of the nation’s credit and debit card transactions, reveals that spending on essential items increased 5.1% in December, although this was slightly lower than November’s year-on-year 7.1%, with spending on fuel seeing its smallest rise of 10.6% since March 2021.

Supermarket spending was up 5.5%, but this was lower than the 6.5% growth seen in November.

The percentage of Britons reporting concerns about rising food prices remains high at 91%, while 65% say they have been looking for ways to reduce the cost of their weekly shop, Barclays reported.

As December’s cold snap led more households to turn up or increase their heating, spending on utilities increased by 40.6%, slightly higher than November’s 40.1%.

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.”