The British Retail Consortium, a UK trade association, said that spending in its members’ stores increased 2.7% last month, well below the 4.2% growth seen in November last year.

The BRC data is not adjusted for inflation, so the rise in sales revenue represents a fall in the volume of goods purchased as items become more expensive.

“While the run up to Christmas typically sees a seasonal boost to shopping, this year’s Golden Quarter may not shine as bright for the retailer sector,” Victoria Scholar, head of investment at Interactive Investor, said.

“elevated inflation and higher interest rates are clearly weighing on consumers’ propensity to spend,” she added.

Tuesday’s figures suggest consumers were opting for budget-friendly, essential items.

The food and drink and personal care categories drove sales growth, and spending on expensive items such as jewellery and watches fell.

Food sales increased 7.6% over the three months to November.

This is below the 12-month average growth of 8.4%, but November sales figures were higher than in the same period last year.

In a separate survey released on Tuesday, audit firm PwC also forecast that festive spending will drop 13% to £20 billion (over €23 billion) this year.

Inflation slowing but still above targets

Britain’s economy continues to suffer from weak growth, but official data showed consumer price inflation slowed in October to 4.6%, after hitting a 41-year high of over 11% one year earlier.

This means that prices are still increasing but at a slower rate.

The Bank of England held interest rates stable at 5.25% at its last two meetings, following 14 consecutive increases since December 2021.

While financial markets believe that rates have peaked, Bank of England officials, who are closely monitoring inflation, have stressed that it is too early to cut rates.

The Bank of England’s inflation target is 2%.

Paul Martin of KPMG said weak sales could lead to some retailers collapsing in early 2024, especially in the case of purely online retailers who have seen the most prolonged fall in sales.

A small Black Friday boost

Online spending data from Adobe Analytics last week showed a 5.6% year-on-year increase in spending during Black Friday and the immediate days after.

Separate figures from Barclays on Tuesday showed consumer card spending grew 2.9% year-on-year in November, compared to 2.6% in October, helped by extended Black Friday sales and early Christmas shopping.

This was however below the level of inflation.

Steve Ponting, a Director at Software AG, said that “while the rate of inflation is slowing, we’re still in an environment of rising prices, meaning that consumers are wanting to save all they can in the run up to Christmas”.

“Retailers are now banking on a successful festive period, but we’re already seeing that it will be one heavily dictated by promotions and offers, loyalty schemes, own brands and discount retailers,” Ponting added.