Written by Andy Bruce and Suban Abdullah
LONDON (Reuters) – British retail sales fell unexpectedly in December, according to data on Friday, raising the risk of an economic contraction in the fourth quarter, adding to the challenges facing Finance Minister Rachel Reeves.
Retail sales, adjusted to include Black Friday sales at the start of the month, fell by 0.3% month-on-month in December after a downwardly revised expansion of 0.1% in November, the Office for National Statistics said.
Sterling fell a quarter of a cent against the dollar after the data, falling below $1.22, and government bond yields fell – reversing a sharp rise last week that briefly drew comparisons to the market chaos seen after former Prime Minister Liz's 2022 'mini-budget'. Gears.
Economists polled by Reuters had expected a monthly increase in retail sales of 0.4%.
Friday's figures add to a string of dismal economic data since Reeves announced Britain's biggest tax rises since 1993 in her October budget, and reinforced expectations of an interest rate cut from the Bank of England next month.
The statistics office said that retail sales for the fourth quarter as a whole fell by 0.8%, which negatively affected economic growth by about 0.04 percentage points during the quarter.
With growth already flat during the three months to November, the contribution of retail sales by itself could be enough to push the economy into contraction in the fourth quarter, assuming there is no offsetting growth from other parts of the economy.
“The decline in sales adds to the disappointment with November GDP earlier this week, suggesting the economy will stagnate in the fourth quarter or perhaps contract slightly,” said Elliot Jordan-Duke, chief UK economist at Pantheon Macroeconomics.
“The (BoE) has an opportunity to cut interest rates in February, which we expect it will take.”
Retail sales data is considered volatile and subject to revision, especially for December readings which tend to be revised upwards, according to records dating back to 2019.
The data showed that excluding motor fuel, retail sales fell by 0.6% on a monthly basis.
“This was driven by a very poor month for food sales, which fell to their lowest level since 2013, with supermarkets particularly affected,” said Hannah Wensselbach, chief statistician.
the total (EPA:) Retail sales rose 3.6% from a year ago, compared to the average forecast for annual growth of 4.2%.
