Retail sales were surprisingly weak at year-end. Following a slightly steeper revised 0.5 percent monthly fall in November, volumes dropped a further 1.0 percent, their fourth decline in the last five months and well wide of the market consensus. Annual growth was minus 5.8 percent, a tick below the previous period's rate, and sales now stand 1.7 percent below their level just before the arrival of Covid.

Excluding auto fuel, the picture was little different with sales sliding 1.1 percent versus November and 6.1 percent on the year.

The latest monthly setback was dominated by the non-food subsector. Excluding auto fuel, purchases here slumped 2.1 percent, their sixth fall in the last seven months. Non-specialised stores (minus 3.1 percent) and the other stores category (minus 6.2 percent) were especially weak although there were partial offsets from household goods (1.5 percent) and textiles and clothing (1.0 percent). Non-store retailing and food (both minus 0.3 percent) also struggled while auto fuel was just flat.

Meantime, overall inflation as measured by the total sales deflator decelerated again from 10.5 percent to 9.4 percent, its first sub-10 percent reading since March. Its non-auto fuel counterpart also eased from 9.8 percent to 9.2 percent, a 5-month low.

December's fall puts total fourth quarter volume sales down 1.0 percent versus the third quarter when they dropped 1.9 percent. In fact, on a quarterly basis sales have not risen since the three months ending August 2021. Today's unexpected decline could yet put a negative handle on quarterly GDP growth but will not stop further BoE tightening next month. It also puts the UK's ECDI at exactly zero and the ECDI-P at minus 1. In other words, economic activity in general is performing just as the market anticipated.

Retail sales in December are expected to rise 0.4 percent on the month to offset November's 0.4 percent fall.

Retail sales measure the total receipts at stores that sell durable and nondurable goods. The data include all internet business whose primary function is retailing and also cover internet sales by other British retailers, such as online sales by supermarkets, department stores and catalogue companies. Headline UK retail sales are reported in volume, not cash, terms but are available in both forms. The data are derived from a monthly survey of 5,000 businesses in Great Britain. The sample represents the whole retail sector and includes the 900 largest retailers and a representative panel of smaller businesses, including internet sales. Collectively, all of these businesses cover approximately 90 percent of the retail industry in terms of turnover.

With consumer spending a large part of the economy, market players continually monitor spending patterns. The monthly retail sales report contains sales data in both pounds sterling and volume. UK retail sales data exclude auto sales.

The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

Retail sales not only give you a sense of the big picture, but also the trends among different types of retailers. Perhaps apparel sales are showing exceptional weakness but electronics sales are soaring. These trends from the retail sales data can help you spot specific investment opportunities, without having to wait for a company's quarterly or annual report.