An ill wind is blowing in the run-up to Christmas as signs point to a dip in spending over the festive period. Is there any hope of good cheer on the horizon?

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Why are we talking about it now?

The Oxford Street Christmas lights were switched on last week, marking the countdown to Christmas, but the one question on the lips of retailers will be how this year’s festive period will compare with last when frozen conditions wreaked havoc during the golden quarter.

What is the outlook?

Retail research firm Decipher predicts that consumers will spend £200m less this Christmas than last, a 0.6% dip in total spend year-on-year, as consumer spending power remains under pressure and confidence remains depressed.

Decipher forecasts sales volumes will fall 2.3% in December.

And Emmanuel Hembert, principal consultant at Kearney’s retail practice, says the decline in Christmas retail jobs is an early indicator of tough trading conditions. The BRC-Bond Pearce Retail Employment Monitor showed employment levels in the retail sector for the third quarter were at their lowest since 2009.

The number of people employed in retail in September slumped by 23,000 full-time jobs, or by 3.1% year-on-year, as retailers postponed Christmas recruitment.

What sectors are likely to perform best?

Online research firm eDigitalResearch believes that 20% of consumers will shop online this year, taking sales away from the high street.

Decipher estimates food retailers will achieve a 1.4% rise in sales, but this will be offset by a 2.2% drop in spending on general merchandise.

Electricals retailers in particular are expected to struggle through the period – spending in the sector is estimated to plunge 7.8%.

Exactly how is consumer sentiment shaping up?

BRC director-general Stephen Robertson has forecast a “difficult” Christmas for retailers as consumer confidence for the third quarter only inched up by 1 percentage point on the previous quarter to 73.

Data from the Consumer Confidence Survey from Nielsen and the BRC showed that, although consumers felt more positive about their finances in the period and a higher proportion believe they have more ‘spare cash’ compared with the previous quarter, the figures are lower than at any time last year.

This signals that consumers plan to spend less in the fourth quarter this year than last. The biggest concern for consumers is the rising cost of utility bills over the winter.