Consumers seem to have finally thrown in the towel: they are no longer supporting the economy. After a year in which the predicted recession repeatedly failed to materialise, high streets finally ran out of steam in December, with sales volumes falling sharply by 3.2 per cent compared to November. Non-food recorded a decline of 3.9 percent. Sales fell 2.8 per cent year-on-year in December, according to retail sales figures released this morning by the Office for National Statistics (ONS).
This appears to signal a rapid descent into recession – except that GDP numbers released last week seemed to show the opposite: the economy rebounded 0.3 percent in December. So are we really sliding into the abyss or is the economy doing quite well?
There are other ways to spend money than in stores or online. People can go to pubs and restaurants, they can hire developers to build a new extension, or they can travel. In addition, companies can invest or produce more for export. The government is spending money too – so it's not impossible that the high streets are in recession while the rest of the economy is doing well.
Since the pandemic, retail sales and the overall economy appear to have decoupled
Alternatively, could December retail sales simply be a statistical oddity? The ONS figures are seasonally adjusted, meaning it attempts to take Christmas into account and smooth retail spending as if it were spread evenly throughout the year. The problem, however, is that assumptions have to be made about how much more people will spend at Christmas. If these assumptions become outdated and people no longer follow the pattern of a huge pre-Christmas spending spree but instead spread their spending over the year, this could lead to a distortion of the figures.
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