Omicron shadows December retail sales

Christmas has been dashed for retailers due to the arrival of the Omicron variant as a recent snapshot of consumer activity shows that retail sales growth has slowed down sharply in the year to December, in contrast to last month’s expectations for a further acceleration.

According to CBI’s monthly distributive trades survey, there has been a general deterioration in reported and expected sales growth across the distribution sector following the announcement of Plan B measures on Dec 8. 

Retail sales growth slowed in the year to December (balance of +8 per cent from +39 per cent last month). Sales are expected to grow at a similar pace next month (+5 per cent).

The employers’ lobby group said sales growth had eased to its lowest since the spring, confounding expectations among retailers that they would build on November’s strong performance.

More than half of firms that responded before the government’s plan B announcement on 8 December said sales were higher than last year, against a third of those that responded on or after that date, said the CBI’s report. The survey was conducted on 109 companies, including 41 retailers, between 24 November and 14 December.

Orders placed with suppliers grew at a faster pace in the year to December than in November, with a slower rate of growth expected next month. Stock levels in relation to expected sales were reported as more than adequate for the first time since February this year and they are expected to be broadly adequate in January 2022.

Retail sales were seen as broadly in line with seasonal norms in December, having been well above typical levels in November. 

Retailers are pessimistic about the outlook for January, says the CBI’s survey report.

“Our December survey confirms what we’ve been hearing anecdotally about Omicron’s chilling impact on activity on the High Street, with retail sales growth slowing and expectations for the coming month sharply downgraded,” said Ben Jones, CBI Lead Economist.

“On the supply side, retailers have been making progress in building up stocks, which were seen as more than adequate to deal with expected demand over Christmas. The concern now is the potential for rapidly rising sickness and staff absences to cause renewed disruption to supply chains in the New Year.

“It’s crucial that the Government takes steps to help society live confidently with the virus, including meaningful dialogue between business, government and unions to assess the impact of restrictions and the need for future support.”