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British retail sales unexpectedly contracted in December, dealing a new blow to Chancellor Rachel Reeves and raising the risk of the economy contracting at the end of last year.
The first official economic data for December showed that the seasonally adjusted volume of goods purchased fell by 0.3 percent between November and December. Office for National Statistics He said on Friday.
Economists polled by Reuters had expected a 0.4 percent increase after a 0.1 percent increase in retail sales in the previous month.
These numbers come a day after economic data appeared It grew by 0.1 percent in NovemberEnding two months of contraction, but falling short of analysts' expectations for an expansion of 0.2 percent. The economy recorded no growth in the three months to November.
“Disappointing retail sales raise the risk of a slight decline in GDP in the fourth quarter,” said Elliott Jordan Doak, chief economist at Pantheon Macroeconomics, adding that the Bank of England “will certainly cut interest rates” when the Monetary Policy Committee meets next month.
The Monetary Policy Committee left interest 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 interest rate by a quarter of a percentage point in February.
After the release of these figures, the British pound fell by 0.5 percent to $1.218. Government bonds continued to rise, pushing the 10-year bond yield down 0.05 percentage point to 4.64 percent.
Office for National Statistics figures showed that in the three months to December, which covers the busiest period of the year for retailers, sales volumes fell by 0.8 per cent compared to the previous three months.
Alex Kerr, an economist at Capital Economics Consulting, said that the decline in interest rates Retail sales It may detract from growth in the fourth quarter.
He added that the decline led to a decrease in the level of gross domestic product by 0.039 percentage points in this quarter, but he still expects the economy to record no growth instead of contracting in this period.
“Either way, the economy is weak and had no momentum at the end of last year,” Kerr said. He added that thanks to the expected growth in household income, “we doubt that the recent economic malaise will continue.”
The ONS said the decline in supermarkets in December was partly offset by an increase in non-food stores, such as clothing retail, which had rebounded from declines in previous months.
“Retail sales were disappointing during the golden quarter, reflecting a difficult trading environment,” said Nicholas Found, head of business content at consumer research firm Retail Economics.
Hannah Wensselbach, chief statistician at the Office for National Statistics, said December's decline was “driven by a very poor month for food sales, which fell to their lowest level since 2013, with supermarkets particularly affected”.
Over the course of all of last year, retail sales recorded their 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.
When compared to the pre-coronavirus pandemic level in February 2020, volumes fell by 2.5 percent in December. This comes despite consumers spending 18 percent more, reflecting the extent to which higher prices affect their purchasing power.
Additional reporting by Ian Smith
