Snapshot - Managers' views

Black Friday bargain hunters boost UK retail sales

UK retail sales beat expectations despite retailers issuing profit warnings, as consumers feel the effects of wage growth acceleration and falling inflation.

24/12/2018

Azad Zangana

Azad Zangana

Senior European Economist and Strategist

  • Household spending up 5% in November compared to the same period last year
  • Consumer demand supported by wage growth acceleration and falling inflation
  • Households may exert caution over coming months to replenish savings

UK shoppers love a good bargain. The latest official retail sales figures show UK households increased spending by 1.5% in November compared to October, and by 5% compared to the same period last year. This was significantly above consensus expectations, suggesting that the Black Friday sales were more popular than most had anticipated. The volume of purchases was also up, but by less at 3.6% compared to 2017. This suggests discounts were not so generous this year, as retailers increased prices on average.

In November, online sales as a share of total retailing exceeded 20% for the first time, with online spending accounting for 21.5% of the total. There was a 13.1% increase compared to November 2017 as both apparel retailers and household goods stores reported over 20% increases year-on-year.

Despite the healthy sales figures, a number of retailers have been issuing profit warnings in the last few weeks, complaining of rising costs and excessive discounting in recent months which has hit profits. This was not only limited to traditional physical stores but also some of the largest online stores too, with shares hit as a consequence.

It seems that households may have completed much of their Christmas shopping early during the discounting period. Good for households of course, but bad news for retailers who are now having to discount aggressively during their most important period of the year.

Moreover, while demand has been supported by households enjoying an acceleration in wage growth, along with inflation falling to a 20-month low. Households , however, run down their savings in the summer, suggesting that they will need to be cautious for the next few months to allow for savings to be replenished.

 

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