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UK Shoppers Rein In Spending As Brexit Nears

Published on Jan 18 2019 10:49 AM in Retail tagged: Trending Posts / Tesco / Next / Black Friday / Brexit

UK Shoppers Rein In Spending As Brexit Nears

British shoppers cut back on spending in the three months to December for the first time since last spring, adding to evidence of a consumer slowdown as Brexit approaches, data showed on Friday.

Retail sales volumes fell 0.2% in the fourth quarter after a 0.2% rise in the three months to November, the Office for National Statistics (ONS) said. Friday's data chimed with other signs that consumer spending is cooling after a strong summer.

Businesses are also cutting investment before Britain's scheduled departure from the European Union in late March, leaving the overall economy growing at a snail's pace.

In December alone, retail sales fell 0.9%, recoiling after November's Black Friday splurge, but were 3.0% higher than a year earlier. Both readings were below economists' forecasts in a Reuters poll.

'Cautious Consumers'

"A major concern for retailers will be that already cautious consumers further limit their spending in the near term at least due to the heightened uncertainties over Brexit," economist Howard Archer from the EY ITEM Club consultancy said. Sterling and British government bonds were little changed after the data.

The ONS said the value of sales fell for the first time in three years in the three months to December, underlining a squeeze on retailers' profit margins as they battle for customers.

A survey last week from the British Retail Consortium showed retailers failed to increase Christmas sales for the first time since the depths of the global financial crisis a decade ago.

Late Surge In Demand

Supermarkets Sainsbury's and Morrison missed Christmas sales forecasts though Tesco beat them. Clothing retailer Next and department store John Lewis reported a late surge in demand.

The ONS data showed a drop in sales of carpets and floor coverings, possibly reflecting a stalling housing market.

While disarray over Brexit has weighed on consumer confidence, there has been some comfort for households recently with the fastest underlying pay growth since 2008 and inflation falling to an almost two-year low of 2.1%.

Highlighting the easing of inflation pressures, the ONS's measure of annual price increases in stores cooled to 0.6% in December from 1.3% in November, the smallest uptick in more than two years.

News by Reuters, edited by Donna Ahern Checkout. Click subscribe to sign up for the Checkout print edition.

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