UK retail sales dive as
inflation weighs, jolting sterling
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[January 20, 2017]
By Andy Bruce and William Schomberg
(Reuters) - British retail sales suffered their biggest slump in more
than four years in December, denting what had been a promising fourth
quarter and rattling sterling as more signs emerged of a pick-up in
inflation since June's Brexit vote.
Consumer spending has been the main driver of Britain's economy since
June's referendum decision to leave the European Union, with other
sources of growth like investment and trade lagging.
Friday's data showed retail sales volumes dropped 1.9 percent
month-on-month in December, far below economists' forecasts in a Reuters
poll for a 0.1 percent decline and the biggest fall since April 2012.
That miss, which cut fourth quarter growth to 1.2 percent from the third
quarter's near two-year high of 1.8 percent, prompted sterling to slide
by almost half a cent to below $1.23.
"December's data delivered some unpleasant omens for this year," said
Martin Beck, senior economic adviser to consultancy EY ITEM Club.
He pointed to annual shop price inflation hitting a three-year high of
0.9 percent, while the annual rate of sales volume growth dropped to a
three-month low of 4.3 percent from 5.7 percent in November.
"The squeeze on households' real incomes is gradually tightening,
implying a tough 2017 for retailers."
The Office for National Statistics' weak December figures, which can be
volatile month-to-month, contrast with financial results from major
retailers, which mostly enjoyed a strong Christmas season.
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A woman carries shopping bags on Oxford Street in London, December
13, 2011. REUTERS/Finbarr O'Reilly
Policymakers have been heartened by British consumers' lack of pre-Brexit
nerves, but there is also anxiety that the economy is too reliant on them for
Monday BoE Governor Mark Carney said he would keep a close eye on consumer
behavior, given consumption-led expansions were generally weaker than
broader-based ones, as they often became dependent on ever-higher rates of
A Reuters poll of economists published earlier this week suggested Britain's
economy is likely to grow around 1.2 percent this year - around half the rate of
2016 - although a recession is not on the cards.
The ONS said sales across all types of retailers - barring "other stores"
covering among others pharmacies, bookshops and garden centers - fell in
(editing by John Stonestreet)
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