Retail sales fell by 0.3 percent in December compared to November's revised marginal 0.1 percent rise. This was driven by supermarket sales which declined significantly (minus 1.9 percent), reaching their lowest levels since April 2013, which retailers linked to weaker-than-expected demand. Specialist food, alcohol, and tobacco stores also underperformed, exacerbating the downturn.

Conversely, non-food stores rebounded, with sales volumes increasing by 1.1 percent. Clothing retailers led this recovery with a 4.4 percent rise, offsetting declines in the previous months, while department and household goods stores benefited from stronger Christmas spending. Notably, online spending rose by 1.5 percent, ending a three-month decline, contributing to online sales comprising 27.0 percent of total retail activity.

Quarterly data reveal broader challenges, as sales volumes fell 0.8 percent in Quarter 4 compared to Quarter 3, despite a year-over-year growth of 3.6 percent. Compared to pre-pandemic levels, volumes remained 2.5 percent lower, reflecting a lingering recovery gap. Interestingly, Black Friday's late-November timing inflated non-seasonally adjusted December data, with a sharp 10 percent monthly increase.

In summary, while December 2024 showed pockets of resilience, the broader retail sector remains subdued, hindered by uneven performance across categories and weaker supermarket sales. The latest update leaves the RPI at minus 26 and minus 31, showing that economic activities are well behind market expectations in the UK.

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.