UK Retail sales Preview: Worst December retails sales in a decade as shoppers spend less

• The total UK retail sales are expected to fall -0.8% over the month in December as consumers rattled by Brexit uncertainty and used November’s Black Friday’s sales for Christmas shopping.
• UK retail sales are facing the worst December performance in a decade.
• A temporary drop in the UK inflation resulting in inflation-adjusted wages rising has only limited impact on retail sales.

The total UK retail sales are expected to fall -0.8% over the month in December, with core sales excluding motor fuel sales falling -0.6% m/m, the Office for National Statistics is scheduled to report on Friday, January 18 at 8:30 GMT.

The annual growth rates of the UK retail sales are set to remain positive with 3.6% over the year growth of total sales and 3.9% y/y growth of core retail sales.

The reason for December retail sales to expectedly become the worst in a decade is the combination of Brexit uncertainty that is increasingly weighing not only on businesses but on consumer's behavior as well. The technical reason is in surprisingly strong November retails sales that were boosted by Black Friday special sales.

The British Retail Consortium (BRC) compiling the independent retail sales monitor in cooperation with KPMG also reported unchanged sales for December. BRC’s Helen Dickinson said that “squeezed consumers chose not to splash out this Christmas with retail sales growth stalling for the first time in 28 months. The worst December sales performance in ten years means a challenging start to 2019 for retailers, with Business Rates set to rise once again this year, and the threat of a No-Deal Brexit looming ever larger.”

The BRC also reported criticism of the UK government policies blaming the rising cost of the Apprenticeship levy, higher wage costs, and rising business rates.

With the UK retail sales struggling throughout the last year, it is expected to have no real GDP growth contribution in 2018.

The outlook for the beginning of 2019 is also negative. “The first months of 2019 will unlikely hold much improvement,” Paul Martin, the head of retail at KPMG noted in the retail sales monitor for December.