UK retail sales unexpectedly climbed in December, offering a bright spot for the economy during the crucial Christmas shopping season. The total volume of retail sales increased by 0.4% last month, according to the Office for National Statistics (ONS).
That modest gain surpassed the 0.1% decline predicted by economists surveyed by Reuters, signaling a resilience in consumer spending that few anticipated.
The figures are a welcome sign for retailers, who often rely heavily on December trading to sustain operations throughout the year.
Online sales provided a significant boost, rising 4.4%—the largest increase since last February—fueled by strong demand for gold and silver following a quieter November.
Retail sales are a key indicator of household consumption, the largest component of the UK economy. Economic growth is a top priority for the government, and rising retail sales can contribute to that goal.
The latest data suggests consumers may have put aside pre-budget anxieties. The budget, delivered on November 26, and the speculation surrounding its contents contributed to an economic contraction in October, the ONS previously reported.
What drove the sales increase?
Demand for precious metals, particularly gold and silver, from online jewelers played a role in the retail sales uptick, the ONS explained. Prices for both metals reached record highs in December, making them more expensive to purchase.
A similar trend was observed in September. Investors often shift funds from stocks to safe-haven assets like gold during times of political and international uncertainty.
Department stores reported a notable decrease in purchases of household goods. However, consumers increasingly turned to online shops, street stalls, and markets. Sales at these “non-store retailers” rose 4.2% last month, the data shows.
The Bigger Picture
Over the 12 months to December, retail sales defied expectations with a 2.5% increase, exceeding the 1.1% forecast by Reuters economists. However, when examining the “golden quarter” – October to December – sales contracted by 0.3% compared to the previous three months.
The July to September period had been strong for retailers, benefiting from favorable weather and the UEFA Women’s Euros.
Despite the recent gains, overall sales volumes for 2024 remained below pre-COVID pandemic levels, still recovering from a significant decline in 2023 when inflation reached double digits.
