U.K. retail sales fell again in November

By Geoffrey Smith

Investing.com -- U.K. retail sales fell in real, seasonally-adjusted terms for the third time in four months in November, as promotions ahead of Black Friday failed to gain much traction with consumers hard-pressed by double-digit inflation.

The Office for National Statistics said that retail sales volumes fell 0.4% from October and were down 5.9% on the year, although it revised October's data higher to show a bigger rebound from September, when sales were depressed by official days of mourning for Queen Elizabeth II.

Excluding volatile auto and fuel, core sales volumes fell 0.3%. Analysts had expected both headline and core sales to grow by 0.3%.

Online retailers fared particularly badly, with sales falling 2.8%. However, they are still up over 18% from their level three years ago, just before the eruption of a pandemic which accelerated the long-term trend toward e-commerce.

Non-food stores posted a drop of 0.6% in sales on the month, while food stores fared better, rising 0.9%. The ONS said anecdotal evidence from retailers suggested that customers stocked up early for Christmas.

“Black Friday and holiday sales have failed to produce the expected sales uplift," said Kevin Bright, global head of McKinsey's Consumer Pricing Practice in e-mailed comments. "While consumers are spending 4.2% more than a year ago, they are focusing on essentials like food and footwear."

Bright noted that despite this month's fall in online sales, online was still faring better than overall sales in year-on-year terms, down only 5%. "This suggests people are looking to stretch their spending power by accessing the lower prices we tend to see online."

McKinsey's research indicates that inflation has hit the spending patterns of younger parts of the population - which have fewer savings - harder than most. Bright said some 64% of millennials and 65% of Gen X are planning to buy fewer products and services in the future if prices continue to rise.

Disposable incomes are also likely to come under further pressure in the new year from higher interest rates, which have raised monthly outgoings on consumer credit card bills and on mortgages. The Bank of England, which raised its key rate to 3.5% on Thursday, said it expects more rate hikes will be needed next year, even though is estimated that headline annual inflation may have peaked.