The value of December spending fell short of the pace of inflation, according to two highly followed surveys on the performance of merchants and others during the crucial Christmas month.
In December, consumer spending failed to keep pace with inflation, supporting experts’ conviction that the United Kingdom is in recession.
In December, the British Retail Consortium (BRC) and Barclaycard reported that expenditure increased by 6.9% and 4.4% in value terms compared to the previous year.
Both results fell short of the inflation rate of 10.7%, which was observed most recently in November.
They were also gratified by the impact of COVID in December 2021, when the proliferation of the Omicron version compelled individuals to limit their Christmas celebrations.
Consumer expenditure numbers confirm the UK’s recession
There was additional, independent evidence that online purchasing declined last month as a result of consumers’ concerns regarding the impact of strikes by frontline Royal Mail employees.
Compared to the same month last year, the eCommerce trade group IMRG reported a 12 percent decline.
It was reported that the week leading up to Christmas was severely impacted by delivery disruptions.
The BRC’s retail sales monitor, prepared with KPMG, cautioned that consumers could face additional price increases if expenses, like energy bills, do not stabilize.
According to Paul Martin, head of retail at KPMG in the United Kingdom. The cost of living crisis dominated the holiday season.
“While the numbers for sales growth in December appear healthy. With sales values up nearly 7 percent from the previous year. This is largely due to goods costing more and conceals the fact that the volume of goods purchased by consumers is significantly lower than it was at this time last year,” he wrote.
“Consumers rejected expensive technology purchases in December, preferring instead for energy-efficient home equipment. And Christmas staples such as clothing and beauty products.”
He added: “With Christmas behind us, retailers face a hard few months as consumers reduce non-essential spending in response to rising interest rates and energy prices, and strike action in several sectors could further damage sales.
“As we approach into spring, we can anticipate casualties on the high street due to the fading of the strong demand across specific categories that have sheltered some stores.”
Why the United Kingdom may be experiencing a recession
The figures supported the view of many analysts and the Bank of England that the consumer spending-driven economy of the United Kingdom is already in recession.
The Office for National Statistics has already reported a decline for the July-September quarter. And a recession would be confirmed by a negative growth rate between October and December of 2022.
Reuters surveyed economists anticipate a 0.3% month-over-month fall for November to be released on Friday.
Normally, the Bank of England would respond to the risk of such a downturn with policy support. But the financial markets anticipate future interest rate increases to combat the threat of inflation to the economy.
A note issued by Pantheon Macroeconomics on Monday cautioned. “The GDP numbers for November should leave no room for debate that a recession has begun.
The MPC (the Bank of England’s monetary policy committee) is presently placing more weight on wage and price trends. Therefore this report is unlikely to result in a significant fall in interest rate expectations.
