Listen to this article
Annual UK retail sales growth unexpectedly slumped in December, suffering the worst monthly decline in spending in more than five and a half years.
Seasonally adjusted retail sales excluding vehicle fuel were only 4.9 per cent higher than the same period last year, lower than last month’s 6.6 per cent growth rate and far below the 7.5 per cent predicted by economists.
Month on month sales were 2 per cent lower than November, driven mainly by declines in non-food stores. Economists had expected only a 0.4 per cent decline.
The disappointing data knocked sterling lower, with the UK currency slipping by 0.4 per cent to just under $1.23 against the dollar.
However, Kate Davies, ONS senior statistician, said the fourth quarter overall remained positive:
Retailers saw a strong end to 2016 with sales in the final quarter up 5.6 per cent on the same period last year, although the amount bought fell between November and December once the effects of Christmas are removed.
There were some notably strong figures from smaller retailers, in particular butchers, who reported a significant boost in sales in the run up to Christmas
British consumers have remained in high spirits since June’s Brexit vote, helping the country defy expectations of an immediate slump in economic growth, but spending is likely to face increasing headwinds this year.
Inflation hit its highest level in more than two years in December, and is expected to rise further in the coming months as the costs of higher energy prices and a weaker pound are passed on to consumers.
Last week, the National Institute of Economic and Social Research said buoyant consumer spending was compensating for weakness in the rest of the economy, highlighting concerns about the potential impact of an inflation-induced spending slowdown.
The British Retail Consortium previously reported a slow start to December sales, though it did eventually see and increase as shoppers left Christmas purchases to the last minute.