Christmas sales outlook ‘dismal’

Capital Economics says poor UK retail sales during October have set a “dismal backdrop” ahead of Christmas, and could force retailers to step up discounting.

The Office for National Statistics revealed last week that retail sales volumes had dropped by 0.8 per cent in October.

Chief UK economist Vicky Redwood says “warnings of an awful Christmas” in recent years have not always led to low spending, although it has not been “particularly good either”.

She says: “October’s poor retail sales figures have prompted fears of a disappointing Christmas on the high street.

“While we doubt that it will be a write-off, we expect consumers to be cautious and retailers might end up having to step up the pace of discounting.”

However, Redwood warns Christmas spending will depend on consumers having money and confidence to spend more.

“Real pay is still falling, with October’s 2.7 per cent inflation rate well above average earnings growth of below 2 per cent,” she adds.

Redwood says unsecured borrowing has begun to pick up, which could suggest consumers are willing and able to borrow to fund spending, but this could lead to a fall in sales at the beginning of next year.