Shoppers ignore panic price cuts

Retailers are cutting prices at the fastest rate in almost two years as nervous shoppers rein in spending, official figures revealed on Friday.

The Office for National Statistics’ latest figures on the crucial month of December showed an overall 0.9% drop in retail sales, while annual sales growth also slowed. While some sales were pulled forward to November by Black Friday promotions, December’s slide came despite desperate price cutting.

The ONS’s annual sales deflator, its measure of how much prices have gone up or down in the past year, fell to 0.4%, the lowest since January 2017. The biggest price-cutters were clothing and retail stores, where prices fell 0.5% on a year earlier.

The detailed figures underlined the nervousness among consumers over big-ticket spending. A 6.3% slump in sales from other stores, which includes carpets and flooring, underlined the slowdown in the housing market ahead of Brexit. Other big fallers included a 2.3% drop in sales from household goods stores, including white goods such as kitchen appliances.

Food stores and petrol stations reported positive sales growth over the month, “highlighting that the decline in December was driven by a fall in the purchase of non-essential items”, according to the ONS.

Pablo Shah, an economist at the Centre for Economics and Business Research, said: “That retail spending has been so subdued despite a record high employment rate and a pick-up in real earnings is a testament to the suffocating effect that Brexit uncertainty has had on consumers’ activity.”

Capital Economics’ economist Thomas Pugh added: “Unless a Brexit deal is signed soon, there is unlikely to be much of a rebound in the first quarter of 2019.”