British retail sales unexpectedly shrank in December, dealing a fresh blow to chancellor Rachel Reeves and raising the risk that the economy contracted at the end of last year.
The first official economic data for December showed the seasonally adjusted volume of goods bought fell 0.3 per cent between November and December, the Office for National Statistics said on Friday.
Economists polled by Reuters had expected a 0.4 per cent increase, after a 0.1 per cent rise in retail sales the previous month.
The figures come a day after data showed the economy grew 0.1 per cent in November, snapping two months of contraction but falling short of the 0.2 per cent expansion forecast by analysts. The economy registered no growth in the three months to November.
“Disappointing retail sales raise the risk of a small GDP fall in Q4,” said Elliott Jordan-Doak, senior economist at Pantheon Macroeconomics, adding that the Bank of England would “definitely cut rates” when the Monetary Policy Committee meets next month. The MPC left rates unchanged at 4.75 per cent in December after cutting borrowing costs twice in 2024. Markets largely expect that the central bank will cut its benchmark rate by a quarter-point in February.
Following the release of the figures, the pound dropped 0.5 per cent to $1.218. Gilts continued to rally, pushing the 10-year yield down 0.05 percentage points to 4.64 per cent.
In the three months to December, which covers the busiest period of the year for retailers, sales volumes fell 0.8 per cent compared with the previous three months, the ONS figures showed. – Copyright The Financial Times
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