Inflation and weather hit UK retailers

HARSH WEATHER and higher inflation combined to give British retailers their worst December on record, reinforcing signs that …

HARSH WEATHER and higher inflation combined to give British retailers their worst December on record, reinforcing signs that growth slowed sharply in the last quarter of 2010.

The data showed the UK retail sector at a weak point ahead of a year in which demand is likely to struggle in the face of a sales tax rise and public sector job cuts.

“These are hugely disappointing figures,” said Daiwa economist Hetal Mehta. “It appears that the belt-tightening started a little earlier than expected.”

The Office for National Statistics said December retail sales were flat on the year after 1 per cent volume growth in November, the weakest change since January 2010 and the worst annual performance for any December since records began in 1988.

READ MORE

Economists had forecast a 0.9 per cent rise on the year.

Overall retail sales fell 0.8 percent on the month after a 0.4 percent rise in November, again weaker than forecast. But stripping out the drop in fuel sales due to disrupted travel, the decline was less steep than predicted.

The data makes it hard for the Bank of England to assess price pressures at a time when higher food and petrol costs have pushed headline inflation to an eight-month high of 3.7 per cent, well above the bank’s 2 per cent target.