07:49
Unhappy Christmas suggests economy shrank in December
The huge 3.7% m/m fall in retail sales in December was much bigger than economists expected.
It strongly suggests the UK economy shrank last month, amid the surge in Omicron cases and Plan B restrictions, just after reaching its pre-pandemic levels again in November.
Bethany Beckett of Capital Economics says GDP could have fallen by 0.5% during December, during “a very unhappy Christmas for retailers”.
With encouraging signs that the Omicron outbreak may have turned a corner and the government’s ‘Plan B’ restrictions due to be lifted next week, retail sales may recoup a bit of this fall in January and probably all of it in February and March.
That said, with the UK’s cost of living crisis looming, we expect a weakening in the consumer recovery to dampen retail sales further ahead. For the Bank of England, though, it’s about high inflation not weak activity. So we still think that interest rates will be raised to 0.50% in early February.
Suren Thiru, head of economics at the British Chambers of Commerce, agrees that there could have been a ‘modest fall’ in GDP last month.
Suren Thiru
(@Suren_Thiru)@ONS data shows retail sales down 3.7% m/m in Dec, as #Omicron & Plan B reduced footfall & lowered spending.
Decline largely driven by a 7.1% fall in non-food store sales. Fuel sales down 4.7% as #Omicron limited mobility.
Data consistent with a modest fall in Dec GDP. pic.twitter.com/7UhYDC2SMM
Suren Thiru
(@Suren_Thiru)The renewed caution to interact triggered by #Omicron & Plan B pushed more consumers online – proportion of online retail sales rose to 26.6% in Dec, up from 26.3% in Nov.
The proportion of online retail spending still higher than the level pre-pandemic (19.7%) in Feb-20.
07:40
Non-food store sales fell 7.1%
This chart shows how ‘non-food stores’ across Britain saw a sharp drop in sales, down 7.1% on average:

Non-food stores were Photograph: ONS
They’re still 2.3% below their pre-coronavirus levels, while overall retail sales are 2.6% higher than in February 2020.
Updated
07:20
Retail sales in Great Britain fell 3.7% in December
Just in: Retail sales in Great Britain tumbled last month as the introduction of Covid-19 restrictions hit spending over the crucial Christmas period.
Retail sales volumes fell by 3.7% in December 2021, the Office for National Statistics reports.
Spending fell as shoppers kept away from high streets and shopping centres following the discovery of the Omicron variant, and following a rise in November as some people finished their Christmas shopping early.

UK retail sales Photograph: ONS
Sales at non-food stores, such as department stores, clothes outlets and household goods sellers were hit hard, the ONS says:
Clothing stores and department stores reported a fall of 8.0% and 6.3% over the month and were 7.2% and 10.6% below levels in February 2020.
The volume of household goods stores sales fell by 3.2% in December and were 1.4% below their levels in February 2020.
Office for National Statistics (ONS)
(@ONS)Clothing stores and department stores reported a fall of 8.0% and 6.3% over the month and were 7.2% and 10.6% below levels in February 2020 https://t.co/b6IpNLYuXe
Some retailers said the the Omicron variant, which increased rapidly during December, had hit shopper visits, the ONS reports.
Sales of petrol and diesel fell by 4.7%, as people were asked to work from home if they could.
Food store sales volumes fell by 1.0% in December 2021; but despite that drop, volumes were 2.0% above levels in February 2020.
Updated
07:19
Introduction: Consumer confidence hit by cost of living crisis
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
UK consumer confidence has slumped to its lowest level in almost a year, as people grow more fearful of inflation, fuel bills and interest rate rises.
A closely watched gauge of consumer sentiment, from research company GfK, fell by four points to minus 19 in January, the weakest since last February during the last lockdown.

Photograph: GfK
People are less optimistic about their own financial position, and the wider economic climate, due to rising bills and likely interest rate rises.
Joe Staton, Client Strategy Director, GfK warns that the squeeze will last for months.
“The UK’s financial pulse weakened further this January driven by concerns over personal finances and the general economic situation.
“All five measures are down in January and the picture on the economy is especially bad with an eight-point decrease in how we see the past year and the year to come. Despite some good news about the easing of Covid restrictions, consumers are clearly bracing themselves for surging inflation, rising fuel bills and the prospect of interest rate rises.
“The four-point fall in the major purchase index certainly suggests people are ready to tighten their belts. Will the mood brighten when the latest wave of the pandemic subsides and Covid numbers improve? It seems unlikely because it’s the cost-of-living squeeze that’s worrying us now and this will affect us for months to come.”

UK consumer confidence Photograph: GfK
Also coming up today
Stock markets are edgy, after Netflix warned last night that its subscriber growth would slow substantially in the current quarter. This downbeat forecast sent its share plunging 20% in afterhours trading:
Investing.com
(@Investingcom)*NETFLIX TANKS 20% IN AFTER HOURS ON SLOWING SUBSCRIBER GROWTH, CATASTROPHIC GUIDANCE$NFLX pic.twitter.com/MQux3xzxEq
European markets are set to fall by between 1% and 2%:
IGSquawk
(@IGSquawk)European Opening Calls:#FTSE 7497 -1.17%#DAX 15685 -1.43%#CAC 7088 -1.47%#AEX 762 -2.04%#MIB 27070 -1.81%#IBEX 8676 -1.58%#OMX 2314 -1.71%#SMI 12420 -1.12%#STOXX 4229 -1.65%#IGOpeningCall
Bank of England policymaker Catherine Mann will give a speech on inflation, while the final day of ‘virtual Davos’ will hear from Australia’s PM Scott Morrison, ECB chief Christine Lagarde, IMF chief Kristalina Georgieva, and US treasury secretary Janet Yellen.
The agenda
- World Economic Forum’s Davos Agenda
- 7am GMT: UK retail sales for December
- 1pm GMT: Bank of England policy maker Catherine L Mann gives a speech ‘On returning inflation back to target’
- 3pm GMT: Eurozone consumer confidence
Updated