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 inflation�s 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 world�s worst bargain � but comparing last month�s data to pre-Covid figures, that�s precisely the deal that Brits got. And that�s 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 doesn�t 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 weren�t much better across the pond: data out in the US last week showed that December�s retail sales took the biggest dive all year, with ten of 13 product categories dropping off. That�s bad news for American growth � and it could help push the US into a recession earlier than economists predicted.