UK retail sales fall sharply in Dec but Q4 solid

Customers queue outside the Selfridges department store in central London.
Customers queue outside the Selfridges department store in central London.PHOTO: AFP

LONDON (REUTERS) - An unexpectedly weak December dragged on British retail sales growth in the fourth quarter of last year, although consumers still spent strongly over the October-December period as a whole.

Shoppers have driven Britain's economy since June's referendum decision to leave the European Union, just as other sources of growth like investment and trade have lagged.

Official data on Friday showed retail sales volumes dropped 1.9 per cent month-on-month in December, far below economists'forecasts in a Reuters poll for a 0.1 per cent decline and the biggest fall since April 2012.

But retail sales growth in the fourth quarter overall stood at 1.2 per cent, enough to make a 0.1 percentage point contribution to economic growth over the period. "Retailers saw a strong end to 2016," ONS statistician Kate Davies said.

The weak December figures, which can be volatile month-to-month, contrast with trading reports from major retailers who mostly reported a strong Christmas season.

Policymakers have been heartened that British consumers have shown little sign of Brexit nerves, but there is also anxiety that the economy is too reliant on them for growth.

On Monday BoE Governor Mark Carney said he would keep a close eye on consumers, given consumption-led expansions were generally weaker than broader-based ones, as they often became dependent on ever-higher rates of borrowing.

A Reuters poll of economists published earlier this week suggested Britain's economy is likely to grow around 1.2 per cent this year - around half the rate of 2016 - although a recession is not on the cards.

The ONS said sales across all types of retailers - bar"other stores" covering a wide range of shops like pharmacies, books and garden shops - fell in December.

The data showed retail prices rose 0.9 per cent in December compared with a year ago, the biggest jump in three years and adding to signs that fall in the value of the pound since the Brexit vote is pushing up inflation.