UK on the verge of a small recession following a December decline in retail sales

December was the worst decline in retail sales since January 2021, raising the possibility of a technical recession in the UK.

The Office for National Statistics reported that after increasing by 1.4% in November (which was revised up from a 1.3% gain), retail sales decreased by 3.2% in December.

The number was far less than the 0.5% fall predicted by the City.

Following a 2.7% gain in November 2023 due to early Black Friday sales and broader discounting, non-food retail sales decreased by 3.9% in December 2023.

Sales of food stores decreased by 3.1%, while sales of non-store retailing—which primarily consists of internet retailers—fell by 2.1% and those of vehicle gasoline by 1.9%.

The definition of recession as two quarters of decline is arbitrary, according to many economists, but it would have significant political ramifications for Prime Minister Rishi Sunak in the upcoming election year.

Sunak is appealing to voters by highlighting the fact that Britain is progressing in the right way, which a recession diagnosis would contradict, given that his Conservative Party is now behind the opposition Labour Party in opinion surveys.

Speaking on Thursday in Davos, Finance Minister Jeremy Hunt stated that he intended to take steps towards tax reductions prior to the yearly budget, which is a significant event that the Conservatives believe can turn things around.

Still, the economic outlook is uncertain.

(Sources: investing.com, reuters.com, proactiveinvestors.co.uk)