Retail sales fell over Christmas
Christmas trading for Britain's hard-pressed retailers was even worse than feared, according to figures which show a drop in volumes in December.
The Office for National Statistics (ONS) said retail sales volumes fell 0.1% month-on-month and were just 0.3% higher than a year earlier.
This dashed City expectations for a modest rise and reinforced fears that the first estimate of GDP for the final three months of 2012, due next Friday, will show the UK is halfway towards a triple-dip recession.
While the high street continued to struggle, prompting the likes of HMV and Jessops to call in administrators, firms with strong internet operations benefited from the roll-out of shopping apps for users of smartphones and tablet computers, as well as the development of click and collect services. Internet sales accounted for 10.6% of all sales in December, an increase of 1.2% on the previous year.
With inflation at 2.7% in December and wage growth much weaker than this rate, Friday's figures showed many Britons reined in their spending over the Christmas period. This impacted sellers of household goods, such as electrical appliances, furniture, hardware and music and video, as volumes declined 3% in the biggest fall since January 2010.
As noted in recent trading updates from John Lewis, Debenhams and House of Fraser, department stores weathered the storm and posted a 0.4% rise in sales volumes in the ONS data. Clothes and shoe store volumes were up 0.7%. But many retailers held their nerve and have said they refused to be panicked into unplanned price discounting in a bid to preserve their margins.
Some retailers have enjoyed strong trading, with budget fashion chain Primark reporting a 25% jump in sales, while catalogue chain Argos posted a 2.7% rise in like-for-like sales. PC World and Currys owner Dixons benefited from the demise of rival Comet posting an 8% rise in UK and Ireland sales, while clothes and homewares giant Next also reported strong sales growth over Christmas.
Vicky Redwood, chief UK economist at consultancy Capital Economics, said: "Nonetheless, it is hard to see consumer demand improving soon. With households' real pay still falling, spending is likely to continue to stagnate in real terms."
David Kern, chief economist at the British Chambers of Commerce, said the retail sector was in a "relatively parlous state", but added: "There are also positive features in the economy. In recent days we heard welcome news of strong UK car exports, and our own recent survey also points to relatively strong business confidence.
"It is premature to talk about a triple-dip recession, but it is clear that the economy's performance is too weak, and sustained measures are needed to support growth."