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Today’s UK national accounts data also shows that people stashed away more of their money into savings at the end of last year.
The household saving ratio, which measure the proportion of income that is saved, rose to 12% in October-December 2024, up from 10.3% in the third quarter of last year.
One bright spot was the impressive 1.9% q/q (CE forecast 0.7% q/q) rise in consumers’ real incomes in Q4. The 4.2% rise in 2024 as a whole suggests households experienced the strongest real income growth in nine years.
With consumer spending hardly rising, at 12.0% in Q4 (up from 10.3% in Q3), the saving rate remains unusually high, suggesting households are choosing to save rather than spend the bulk of those gains.
Non-food stores – the total of department, clothing, household and other non-food stores – rose by 3.1% over the month. This put monthly sales volumes at their highest level since March 2022.
“The exceptional volatility in recent retail sales outturns has made it difficult to identify underlying trends. In each of the past two years, sales in food stores have slumped in December, risen markedly in January, then fallen back again in February. Sales figures for non-food stores have also been exceptionally volatile in recent months.
We suspect this reflects a combination of seasonal adjustment problems and the fact that retail sales data can be very noisy. It appears unlikely that the recent strength is indicative of a strong improvement in the underlying performance of the sector, and we expect sales to fall back in the coming months.
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