The latest retail sales figures are disappointing, but we expect sales volume growth to improve in the coming months though at a slower rate than in the early part of 2015.
Friday’s release from the Office for National Statistics (ONS) showed that retail sales volumes fell by 1.0% between November and December, the largest monthly decline since September 2014.
The monthly fall caused a slowdown in volume growth in the three-months to December to 1.1%. Comparing the latest three months to the same period a year earlier growth slowed to 3.7% from above 5% in November. In the year to December volumes grew by 2.6%, the smallest increase since September 2014. Given deflation in the sector, values decreased by 1.0%, the largest fall in over six years and the first decline since May 2009.
The weakness in sales volumes afflicted most store types over the important Christmas selling season. Clothing & footwear stores registered their largest monthly decrease in volumes since September 2014 at 6.2%, with many retailers citing the unseasonably warm weather as a constraint on sales. Household goods stores volumes in December also fell by their largest margin since March 2013, declining by 4.8%. Despite this, the strength of sales volume growth in November helped this store type to maintain a respectable gain in the three months to December.
Predominantly food stores were the best performers in December, registering monthly volume growth of 2.0%. On the three month measure volumes have grown by more than 1.0% in the last two months which represents a notable up-tick in volumes compared to the previous year. Department stores also registered positive volume growth of 0.4% in December. On the three month measure it was the best performing store type growing by 2.1% in the three months to December.
In the coming months we expect volume growth to improve though remain below the pace we saw in the early part of 2015. With inflation forecasted to pick up only gradually, values will continue to grow only modestly for some time.