This has been a heavy week for UK economic and this morning we got the first clue as to how the last quarter of 2025 went.
The quantity of goods bought (volume) in retail sales is estimated to have fallen by 0.3% in Quarter 4 (Oct to Dec) 2025 compared with Quarter 3 (July to Sept) 2025.
As you can see it is not the best way to start counting up as we find out the numbers for 5% of GDP. The main drivers of this are below.
Supermarkets and non-store retailers’ sales both fell following a strong Quarter 3 2025.
The quarterly decline was in spite of the fact that December and thus the Christmas season saw some growth.
Retail sales volumes are estimated to have risen by 0.4% in December 2025, following a fall of 0.1% in November 2025 (unrevised from our previous publication) and a fall of 0.8% in October 2025 (revised up from a 0.9% fall in our previous publication).
This was better than expectations but care is needed as they are pretty much always wrong! If you wish to put a positive spin on the developments you could argue that there is a trend improvement in the monthly series, but the problem is that the series is not really accurate enough for that.
As it is the end of the year we can also look at the annual picture.
Annual sales volumes rose 1.3% over the year to 2025, with increases in both food and non-food stores, as well as non-store retailers.
So probably similar to overall GDP growth which is welcome but nothing to write home about.
Actually we can look further back as you may note from the chart below that the index set at 100 in 2023 has only risen to 102
Then if you look further back.
Volumes were down by 1.5% compared with their pre-coronavirus (COVID-19) pandemic level in February 2020.
What happened in December?
We can start with a topic that is popular in the comments section.The emphasis is mine.
Total sales volumes rose over the month to December 2025. Non-store retailers rebounded, with online jewellers confirming renewed demand for precious metals, following a lull in November 2025.
So Gold and Silver and they remain in the news with another all-time high for Gold yesterday as it passed US $4900 and I note that Silver has surged again and is at US $98.
Gold (Gold)
Always believe in your soul
You’ve got the power to know
You’re indestructible
Always believe in, ‘cos you are
Gold (Gold)
Glad that you’re bound to return
There’s something I could have learned
You’re indestructible, always believing
I do sometimes wonder if the moves impact the sales of Spandau Ballet’s biggest hit? Also the surge in Silver has been really extraordinary as I recall the days when the Silver loans and he like held it around US $5. Well played if you have been long but there must also be enormous losses out there as the game for so long was to be short. Indeed Max Keiser built a career out of pointing this out before he discovered Bitcoin.
As we look through the other risers we also see a frankly depressing further decline for the high street.
There was also a small rise for supermarkets and sales of automotive fuel, while non-food stores (the total of department, clothing, household, and other non-food stores) fell 0.9% on the month.
By contrast online sales remain strong.
With the monthly series, online sales values rose by 1.8% over the month to December 2025, and by 11.1% when comparing December 2025 with December 2024.
That was quite an annual surge.
Total spend (the sum of in-store and online sales) rose by 0.8% over the month. As a result, the proportion of sales made online rose from 28.0% in November 2025 to 28.3% in December 2025.
In my locale you see so many deliveries that this feels an unstoppable trend.
I did have a look for some more detail on the impact of Gold and Silver on the Retail Sales figures but the categories provided in the tables are too broad for that.
There was some welcome news on the inflation front because in the year to December value growth was 4.2% and volume growth 2.5% suggesting the deflator or inflation measure was of the order of 1.7%.
A Deeper Perspective
Looking back we see this.
Retail sales volumes rose by 1.3% in 2025, following a rise of 0.2% in 2024, and falls in both 2022 and 2023. Despite this being the second consecutive annual rise, volumes did not recover from the 2023 fall, and remained below 2019 pre-coronavirus (COVID-19) pandemic levels.
The chart below reminds us of how poor 2023 and especially 2022 too were for this sector.
The S&P Global PMI
This brought some welcome news as the morning progressed.
UK private sector companies indicated a solid increase in output levels at the start of 2026, with the overall rate of expansion reaching its fastest for just under two years. This was led by a robust and accelerated upturn in service sector activity.
The “fastest for just under two years” provides some food for thought if you think of the first quarter growth we have seen in the official GDP numbers. But the PMIs and GDP numbers often do not correlate that well.
At 53.9 in January, up from 51.4 in December, the headline seasonally adjusted S&P Global Flash UK PMI® Composite Output Index posted above the neutral 50.0 threshold for the ninth consecutive month.
The official GDP index reached 102.7 in June and until November the subsequent months were all below this.
But the survey itself lead to an upbeat conclusion.
Companies are reporting higher demand, both from home and export markets, which has driven output growth to the fastest since April 2024…….”The January flash PMI is up to a level indicative of a robust quarterly GDP growth approaching 0.4%.
They even picked up some growth from manufacturing.
Manufacturing production meanwhile increased modestly. Higher output volumes have been recorded in each of the past four months, and the latest rise was the fastest since October 2025. Some goods producers noted improved export sales, while others signalled a boost from customer restocking.
The news was not so great for a Bank of England Governor keen on interest-rate cuts.
“High staffing costs were meanwhile again widely reported as a key cause of higher selling prices, hinting at an intensification of price pressures at a level above the Bank of England target.”
Nor for the policies of Chancellor Rachel Reeves.
The good news was tempered, however, by the upturn in order books failing to stem a steep loss of jobs, which companies commonly blamed on the need to reduce high costs. These cost pressures were again often linked to government policies relating to higher National Insurance contributions and the National Minimum Wage, and led to an especially steep drop in hospitality jobs.”
No wonder she is trying to U-Turn on a rise in business rates for the hospitality sector.
Comment
This week has been cheerful in the sense that the economic data has got better. We started with falling employment and higher inflation and have ended with better than usual borrowing figures and some hope for the economy in the first quarter of 2026. There is a nuance to the latter news because we seem to have established a trend of good first quarter GDP figures followed by something of a malaise. Or another ares where the seasonal adjustment needs investigating. But we can head for the weekend with some cheer….
