Christmas shopping spree during December 2019 failed to materialise as retail sales volumes dropped by 0.6%, for the fifth month in a row with no growth, according to the Office for National Statistics.
The ONS said, “Anecdotal evidence from a number of stores stated that goods did not sell as well as expected.”
Last week the British Retail Consortium said last year was the worst on record since 1985.
Food store sales were dropped 1.3% in December compared to the previous month and department stores saw sales fall 1.8% month-on-month whilst clothing stores had a 2% drop in sales.
Ranko Berich, Head of Market Analysis at Monex Europe said, “December’s retail sales data shows that consumer spending saw an outright collapse in Q4 last year. Although retail sales are volatile and subject to seasonal effects around the holidays, in the context of other recent data misses, this release looks very bad indeed. The Monetary Policy Committee (MPC) is now in a dilemma.
“Cutting rates now runs the risk of an investment boom in Q1 forcing a quick retreat. But should the much hoped for investment pickup not materialise, a 25 basis point cut may prove too little, too late, and the MPC will find itself uncomfortably close to the negative interest rate vortex that has engulfed the Eurozone and Japan.
“With the Bank Rate at 0.75% the MPC does not have much room before rates hit zero, so there is a powerful incentive to cut rates earlier rather than later. This type of reasoning saw several global central banks take out “insurance” rate cuts over the past year.
“The Bank of England (BoE) has been burned with this type of move before, in 2016 when survey data dived in the wake of the EU referendum, but then quickly recovered, making the BoE’s rate cut look somewhat unnecessary. But the current slowdown in the UK economy has been confirmed by a matching slowdown in hard data, making a cut far more likely.
“Next week’s flash Purchasing Managers Indices will be the most significant for sterling in years. The bar for causing the MPC to hesitate may not be as high as lagged data such as retail sales suggest, however. Given the MPC has been burned with insurance rate cuts in the past, a solid pickup in business sentiment, especially employment intentions, could still cause a hold at this month’s meeting.”