The UK economy received little in the way of an early holiday gift, as freshly released data for November painted a picture of sluggish growth and ongoing challenges. Retail sales volumes across Great Britain inched up a mere 0.2% month-on-month, falling short of economists’ already modest expectations for a 0.5% increase. Meanwhile, government borrowing dropped to £11.25 billion, its lowest November level in three years, aided by higher tax receipts and reduced debt interest payments.
The lackluster retail performance comes at a particularly inopportune time, as November marks the start of the critical “Golden Quarter” for retailers, encompassing the key holiday shopping season. The muted sales growth suggests that consumers, grappling with persistent inflation and economic uncertainty, are keeping a tight grip on their wallets. While some retailers saw a boost from early Black Friday promotions, others, particularly in the clothing sector, reported tough trading conditions.
A Closer Look at the Numbers
Digging into the details, the ONS reported that sales rose at supermarkets and other non-food stores, but clothing retailers took a hit. Food store sales, which had declined for the past three months, saw a welcome uptick, particularly at supermarkets. Household goods stores, notably furniture shops, also enjoyed a good month. However, clothing stores once again bore the brunt of consumer caution, with sales dipping sharply.
Black Friday Blues
The ONS data doesn’t directly capture the impact of Black Friday, which fell on November 29th, outside of the survey period that ended on November 23rd. However, the statistics agency noted that it had adjusted its figures to account for this timing shift and provide the most accurate picture of retail activity. With Black Friday sales increasingly spread out over a longer period, both before and after the actual event, November’s data likely reflects some of this promotional activity. The true impact will be revealed in December’s report.
“With November’s retail sales survey covering the four weeks to the 23 November, Black Friday itself will fall within December’s figures. However, our figures account for this shift in timing to give us the best picture of what is happening in the shops.”
– Hannah Finselbach, ONS senior statistician
Government Borrowing Drops, but Challenges Remain
On the fiscal front, government borrowing fell to £11.25 billion in November, £3.4 billion lower than the same month last year and the smallest November shortfall since 2019. The drop was driven by a combination of higher tax receipts and a significant reduction in debt interest payments, which more than halved to £3 billion. While the improvement in the public finances will be welcomed by the Treasury, the economic outlook remains challenging.
“Borrowing this month was over £3 billion less than this time last year and the lowest November borrowing for three years. Central government tax receipts grew compared with last year, while increased spending on public services and on benefits were offset by lower debt interest payable.”
– Jessica Barnaby, ONS deputy director for Public Sector Finances
An Uncertain Path Ahead
As the UK economy navigates the crucial holiday period, the path forward appears strewn with obstacles. With the Bank of England holding interest rates steady and inflation stubbornly persistent, growth prospects heading into the new year are murky at best. As one analyst put it:
“With the Bank of England keeping interest rates on hold [yesterday] and inflation in the system, there are concerns around growth prospects as we go into the new year. Christmas is a key period for retail sales and will give a further clue on short term outlook and may influence the BoE at its next meeting.”
– Neil Birrell, chief investment officer at Premier Miton Investors
For now, all eyes will be on December’s retail sales report, which will provide the clearest indication yet of how the UK consumer is faring in the face of mounting economic pressures. With so much riding on the holiday shopping season, retailers and policymakers alike will be holding their breath, hoping for a Christmas miracle to lift the nation’s economic spirits.
