LONDON A spending spree by British shoppers in the week before Christmas failed to prevent sales in December from falling short of the previous year's level, industry data showed on Friday.
Robust growth in consumer spending has been one of the main factors sustaining Britain's economy since last June's vote to leave the European Union. But many retailers fear a squeeze on spending as inflation begins to erode real earnings growth in 2017.
Like-for-like retail sales in December fell 0.1 percent year on year, according to BDO, the accountancy and business advisory firm. However, online sales in the month rose 19 percent year on year, further evidence of a continuing shift in shopping habits.
"With such a weak base for December 2015 (when sales fell 5.3 percent) any further decline can only be seen as a poor result for retailers," said Sophie Michael, head of retail and wholesale at BDO.
"Coming at a critical juncture, this fourth negative December in succession highlights the magnitude of the challenge that lies ahead for 2017, when consumers will more keenly feel the bite of inflation and the weaker pound," she added.
Sales of fashion goods declined 1.07 percent in December, but the overall figure was pushed toward parity by like-for-like increases in the lifestyle and homewares sectors, up 2.4 percent and 2.6 percent respectively. Lifestyle includes gift and technology items.
BDO said that in the week leading up to Christmas Day sales increased 11.7 percent year on year – the largest weekly growth figure for the whole of 2016. However, the outcome partly reflected Christmas Day falling on a Sunday.
On Wednesday clothing retailer Next (NXT.L), the first major British retailer to give an update on Christmas trading, cut its profit forecast for the current financial year and warned of a further decline in 2017-18.
The British Retail Consortium is scheduled to publish December sales data on Jan. 10. Official data for the month is published on Jan. 20.
Next week will also see a raft of Christmas trading updates, including from supermarkets Morrisons (MRW.L), Sainsbury's (SBRY.L) and Tesco (TSCO.L) and from Marks & Spencer (MKS.L), Debenhams (DEB.L) and ASOS (ASOS.L).
(Reporting by James Davey; Editing by Keith Weir)