Shopping Stumbled

Image source: Straight 8 Photography - Shutterstock

What's going on?

British retail sales took a surprise tumble last month, according to data out on Friday.

What does this mean?

December had all the makings of a shopathon: the government was doling out money to help with bills, the World Cup was in full swing, and the gift-giving season was nigh. But inflation must have been stronger than all those factors combined, because they ultimately did diddly-squat to boost sales. Clothing saw an uptick, sure but that was probably because inflations taken the shirt off workers backs. And the upswing in furniture sales? Well, that was probably down to exhausted Brits needing sofas to collapse onto. Everything else fell off a cliff, even staples like food, and festive gifts like toys and jewelry. That left economists, who expected retail sales to jump 0.5% from November, scratching their heads when a 1% drop actually materialized. All in all, the volume of sales slipped 5.8% from the year before the sharpest decline for December since records began.

Why should I care?

The bigger picture: Not-so-square deal.
Paying over 13% more to get about 2% less sounds like the worlds worst bargain but comparing last months data to pre-Covid figures, thats precisely the deal that Brits got. And thats getting them understandably glum: separate data out on Friday showed that a key measure of consumer confidence fell in January, marking the longest period of gloom in nearly 50 years. That doesnt bode well for retail sales and with household savings running low, even a dip in inflation might not make up for it.

Zooming out: Skint Uncle Sam.
Things werent much better across the pond: data out in the US last week showed that Decembers retail sales took the biggest dive all year, with ten of 13 product categories dropping off. Thats bad news for American growth and it could help push the US into a recession earlier than economists predicted.

Originally posted as part of the Finimize daily email.

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