After the Brexit vote, Christmas was always going to be the British consumer's last hurrah. Official data today makes it look like the party never even got started.
The volume of goods sold in December fell 1.9 percent from November, the Office for National Statistics said on Friday, the biggest drop since April 2012.
This bad news is at odds with the broader picture from Britain's big retailers, which on the whole reported a pretty decent Christmas. Marks and Spencer Group Plc and Wm Morrision Supermarkets Plc were particularly noteworthy for announcing surprisingly positive results that marked a distinct change from long periods mired in the doldrums.
Most retailers that have published profit reports for the holiday period and the final quarter of the year so far have included Black Friday, whereas the December ONS data excludes it (although both include Cyber Monday). There have also been some quirky calendar effects to contend with, such as five extra days of trading in 2016 boosting M&S's Christmas performance compared to 2015.
Given this, the ONS data point to some mystery losers on the high street. True, Next Plc has already reported a disappointing Christmas, but others must have lost out too. Philip Green's Arcadia group, for example, will have been hit by the continuing trend of consumers falling out of love with clothing.
For those that have reported, it's also worth remembering that official retail sales data were up more than expected in October, as cold weather prompted shoppers to snap up coats and boots, which are particularly helpful for retailers' bottom lines. The weather wasn't particularly chilly in December, so that boost probably wasn't repeated. Consumers have also been heeding warnings on price rises, and have snapped up items such as electricals before the hikes set in, particularly when discounts were on offer over Black Friday.
The ONS's year-on-year data for December are perhaps more reflective of the big groups' situation, as they show the volume of goods sold including fuel is still up 4.3 percent, a much better performance than December 2015.
That may actually be over-egging the positive, and there's still room to worry. For one thing, the data are flattered by a very strong performance from online retailers and small stores, particularly butchers. That's questionable, given how much local shops have suffered since the recession, with swathes of closures.
A deeper concern is that there's no doubt that the consumer is starting to feel the pinch from the inflationary impact of the pound's slump following the Brexit vote. The monthly ONS report highlights the broader trend, noted by some big stores, that higher prices and concerns about employment are beginning to feed through to spending. The full effect of this is unlikely to be felt until later this year as inflation picks up. Consumers also don't really start to rein in spending until job cuts hurt them personally or pay growth starts to deteriorate. That's yet to come.
In short, Friday's official report is an early warning that even with the big retailers' Christmas cheer, and positive annual growth in the official sales volume data, the squeeze on consumer spending is already underway. However much Britain's retailers and shoppers work to counteract the higher prices, the hit can't be avoided. The January post-holiday blues should last for quite some time.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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