Britain's FTSE 100 index showed minimal movement at 0.05% in the red as investors analyzed the recent data from both the retail and construction sectors. In December 2024, retail sales in the UK increased by 3.1% year-over-year on a like-for-like basis, contrasting with a 3.4% decline in the previous month, and outperforming the consensus estimate, which predicted a drop of 0.2%.
Despite remarkable strong sales during Black Friday, which typically bolsters fourth-quarter performance, the overall retail growth was modest at just 0.4% year over year. BRC Chief Executive Helen Dickinson stated, "While we project sales growth to average 1.2% in 2025, this is below the anticipated shop price inflation of 1.8%." Dickinson pointed out a slight 0.7% increase in retail sales for 2024, juxtaposed against rising costs for retailers.
This trend indicates that although sales figures may keep a positive tone, the actual volumes are forecasted to decline this year amidst increasing costs due to regulatory changes and tax hikes, predicted to impact retailers by an estimated £7 billion arising from elevated National Insurance Contributions, enhanced living wage mandates confirmed in the Budget, and the introduction of new packaging levies. In the realm of construction, growth in UK output saw a deceleration in December 2024.
The latest S&P Global UK Construction PMI reported a reading of 53.3, a decrease from 55.2 in November 2024, falling short of the consensus estimate of 54.4. This figure indicates a contraction in business activity, marking the slowest growth rate since June 2024. On the corporate front, Next ($NXT), a British retailer, raised its profit guidance for fiscal 2025 due to robust Christmas trading and higher-than-expected international interest.
This has led to a notable surge in Next's shares, which climbed 3.75% at market close. RBC Capital Markets commented, "Around 85% of NEXT's sales originate in the UK, suggesting that its performance is closely tied to the consumer climate in the UK. Although there are possible headwinds regarding a softer employment landscape, NEXT maintains a significant margin for error.
The retailer also has impressive potential to further enhance its high-return Total Platform business for other brands, utilizing its well-established systems, online warehousing, and distribution framework." Key market indices continue to reflect investor sentiment and economic indicators as the UK navigates the complexities of retail performance and construction activity, amidst a changing economic landscape..