It’s changing into clear that Christmas 2022 was the festive season the place all of us paid extra however bought much less.
Maybe that’s apparent in a time of double-digit inflation. However the UK shopper, collectively, was ready to stump as much as obtain not fairly the identical current haul or festive unfold. That bodes effectively for retailers’ buying and selling updates subsequent week. However it’s a state of affairs unlikely to persist into 2023.
The info was already pointing this manner within the run-up to the Christmas break. In November’s retail gross sales, there was a 3.6 per cent improve within the worth of purchases, excluding petrol, in contrast with a yr earlier. That purchased the nation’s consumers 5.9 per cent much less by way of the amount of products bought. Evaluate November to February 2020 and the British shopper is handing over 14 per cent extra kilos to get principally the identical quantity of products.
Heaving tables and increasing waistlines had been — from a retail, if not public well being perspective — meant to be the intense spot. Grocery took a much bigger share of spending as customers sought to guard their Christmas dinner. In a yr when hospitality once more suffered due to transport strikes and disruptions, grocery gross sales in December hit a document £12.8bn, up greater than 9 per cent, in line with Kantar. However gross sales by quantity nonetheless fell 1 per cent, regardless of growing buying and selling right down to supermarkets’ lower-margin personal label merchandise. Mince pie lovers spent 19 per cent extra to scoff basically the identical variety of treats.
The sense of a final shopper hurrah was reinforced by high street bellwether Next on Thursday. True, the stalwart retailer’s December figures had been helped by a rush for coats within the chilly snap, and out-of-town shops that benefited within the rail chaos. However fourth-quarter full value gross sales, up 4.8 per cent, had been significantly better than anticipated, serving to the retailer tweak its forecast for revenue earlier than tax for the yr to January barely larger. Discounter B&M’s upgrade to revenue forecasts advised this wasn’t simply Subsequent sharpening its halo because the UK’s best-run retailer.
Nonetheless, the general message was that clients can’t stick with it confronted with excessive vitality payments and rising mortgage prices — with 3-4mn mortgages anticipated to reset to larger charges this calendar yr, in line with Shore Capital.
Subsequent, admittedly all the time cautious, thinks rising costs, sinking gross sales volumes and affordability pressures will put gross sales development into reverse this yr. Full value gross sales within the yr to January 2024 are anticipated to be down 1.5 per cent. Promoting costs are projected to rise 8 per cent within the first half of the yr and 6 per cent within the second half of the yr, whereas general volumes are forecast to drop sufficiently to provide £30mn in operational value financial savings, about the identical because the estimated improve in gasoline and electrical energy payments.
One critical unknown is how a lot of the nation’s festive cheer was loved on tick, placing extra strain on budgets this yr. “It might need been a deceptively good Christmas, notably for the excessive road retailers helped by colder climate and postal strikes, and fuelled by rising bank card and purchase now, pay later spending,” stated Kien Tan, retail specialist at PwC. “Both approach, there isn’t any query that consumers must rein in discretionary expenditure this yr.”
Subsequent’s finance earnings, from its personal credit score operations, rose nearly 8 per cent within the second half of 2022, development it expects to remain optimistic (simply) this yr. The corporate put that right down to buyer balances getting again to regular after debts were reduced in the course of the pandemic.
The Financial institution of England this week reported a sharp rise in consumer credit in November, defined by larger ranges of bank card borrowing. Client credit score, helped by pandemic financial savings and low unemployment, has been remarkably resilient within the face of value of dwelling pressures. However the central financial institution in December noted increased pressure on households’ capacity to deal with these money owed, particularly as mortgage charges reset larger.
The primary half of this yr nonetheless appears to be like a tough one for retailers and lenders alike.
