Long Shot

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What's going on?

Data out on Friday showed that UK retail sales fell by more than expected last month, but the odds weren’t exactly in their favor

What does this mean?

December was never going to live up to Novembers bumper growth in retail sales, especially after an Omicron-driven surge brought a whole new wave of restrictions and jitters. But even then, those sales were down 3.7% in December from the month before a long way off the 0.6% drop economists were expecting, and the biggest since the start of the countrys third lockdown last January (tweet this). They were down across the board too, with spending in clothing and sports stores falling 8%, furniture stores 3%, and gas stations 5%. It could be worse, mind you: UK retail sales were still 2.6% higher than they were before Covid kicked in.

Why should I care?

Zooming in: It could be a hard year.
A lot of countries are dealing with rising prices right now, its true, but Brits might have a particularly tough time ahead. For one thing, the governments already moving to claw back the cash it spent during the pandemic, starting by raising taxes in April in a bid to raise 14 billion ($19 billion) this year. And for another, the Bank of England is expected to hike interest rates again next month a move thatll make it even more expensive to borrow what they need.

The bigger picture: It could be a really hard year.
Given all that, it’s no wonder UK consumer confidence a measure of how settled shoppers are with their personal finances and the wider economy just hit its lowest level in almost a year, according to data out on Friday. In fact, KPMG thinks as many as a third of shoppers wont buy as many nice-to-haves this year as they did last. And since its those consumer discretionaries that drive so much economic growth, it doesnt bode well for the countrys recovery.

 

Originally posted as part of the Finimize daily email.

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