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British retail sales unexpectedly fell in December, dealing another blow to chancellor Rachel Reeves and raising the risk of an economic downturn at the end of last year.
The first official economic data for December showed that the seasonally adjusted amount of goods purchased fell by 0.3 percent between November and December, State Office of Statistics he said on Friday.
Economists polled by Reuters had expected a 0.4 percent rise, following a 0.1 percent rise in retail sales last month.
The figures come a day after data showed the economy rose 0.1 percent in Novemberending a two-month contraction but below analysts’ forecasts for a 0.2 percent rise. The economy did not register growth in the three months ending in November.
“Disappointing retail sales raise the risk of a small fall in GDP in the fourth quarter,” said Elliott Jordan-Doak, senior economist at Pantheon Macroeconomics, adding that the Bank of England will “definitely cut rates” when the Monetary Policy Committee meets next month.
The MPC left rates unchanged at 4.75 percent in December after cutting borrowing costs twice in 2024. Markets largely expect the central bank to cut its benchmark rate by a quarter of a point in February.
After the data was released, the pound fell 0.5 percent to $1.218. Gilts continued to rise, lowering the 10-year yield by 0.05 percentage points to 4.64 percent.
In the three months to December, which cover the busiest period of the year for retailers, sales volumes fell by 0.8 per cent compared with the previous three months, ONS figures show.
Alex Kerr, an economist at the Capital Economics consultancy, said the decline retail it would dampen growth in the fourth quarter.
The decline reduced the level of GDP by 0.039 percentage points in the quarter, he added, but he still expects that the economy will not grow in that period but will shrink.
“Anyway, the economy is weak and lacked momentum late last year,” Kerr said. Thanks to expected growth in household incomes, “we doubt the recent economic problems will continue,” he added.
In December, falls in supermarkets were partly offset by growth in non-food stores, such as clothing retail, which recovered from falls in previous months, the ONS said.
Nicholas Found, head of commercial content at consumer research firm Retail Economics, said: “Retail sales disappointed for the golden quarter, reflecting a difficult trading environment.”
ONS senior statistician Hannah Finselbach said the decline in December “was driven by a very poor month for food sales, which fell to their lowest level since 2013, with supermarkets particularly affected”.
In the whole of last year, retail sales recorded the first expansion in three years. Volumes rose 0.7 percent in 2024, after a 2.9 percent decline in 2023 and a 4.1 percent decline in 2022.
Compared to the level before the coronavirus pandemic in February 2020, volumes fell by 2.5 percent in December. This is despite consumers spending 18 percent more, reflecting how rising prices have hit their purchasing power.
Additional reporting by Ian Smith
