Supermarket Food Sales Plunge, Weighing Down the Pound

Supermarket Food Sales Plunge, Weighing Down the Pound.

Retail sales in the UK experienced an unexpected decline in the lead-up to Christmas, attributed to a "very poor month" for food sales in supermarkets.

According to official statistics, sales decreased by 0.3% in December, falling short of the anticipated 0.4% increase.

Food sales reached their lowest point in over a decade, while clothing retailers and department stores reported an increase in business activity.

Following the release of these figures, the pound depreciated to $1.21 from $1.22. This surprising data raises further concerns regarding the state of the UK economy.

Economists noted that these figures marked a "disappointing" conclusion to 2024 for the retail sector, a time when businesses typically aim to maximize profits.

Alex Kerr, a UK economist at Capital Economics, remarked that the worse-than-expected sales figures serve as "further evidence that the economy had very little momentum at the end of last year".

But he added: "Although the economy clearly struggled at the end of last year, we doubt that will last."

Elliott Jordan-Doak, a senior UK economist at Pantheon Macroeconomics, expressed his anticipation for an improvement in sales in the upcoming year.

The retail sector faced significant challenges last month, primarily due to a decline in sales volumes at supermarkets. Additionally, specialized food retailers, including butchers and bakers, as well as shops selling alcohol and tobacco/vaping products, also experienced difficulties, as noted by Hannah Finselbach, a senior statistician at the Office for National Statistics, which publishes the official data.

Conversely, clothing and footwear retailers reported a 4.4% increase in sales last month, recovering from declines observed in November and October, which indicates a rise in consumer spending leading up to Christmas.

The unexpected drop in supermarket food sales and the resulting dip in the pound highlight growing concerns about the UK economy. The December retail sales figures reflect a broader lack of momentum, especially as businesses typically see a surge in profits during the holiday season.

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The decline in food sales, alongside struggles in specialized food retailers, signals that inflation and cost-of-living pressures are affecting consumer spending. While economists are hopeful for a rebound in 2025, these figures serve as a reminder that the UK's economic recovery remains uncertain, leaving both businesses and consumers facing a challenging year ahead.