U.K. Budget Deficit Narrows; Retail Sales Fall Most In 15 Months

The annual inflation rate rose to 1.6 percent, shy of economists’ expectations for an increase to 1.7 percent.

“It seems that the unusually warm weather disrupted consumers shopping habits and discounting hurt the retailers’ revenues”.

In value terms, adjusting for changes in prices that is, retail sales decreased by 1.0% versus a year ago.

“Promotions during the 2015 Christmas period were more spread out compared with 2014, with retailers offering discounts over a longer period of time rather than a one-day event”.

The milder than usual weather hit sales of clothing and footwear, which fell by 6.2% from November – the largest monthly fall on record.

For the fourth quarter as a whole, however, growth in sales volumes picked up to a one-year high of 1.1 percent, suggesting consumer spending will support broader fourth-quarter economic data due next week at a time when other sectors are fading.

The figures broadly tally with the message big retailers, whose industry body, the British Retail Consortium, gave earlier this month that Christmas sales had been disappointing.

“The fall in borrowing in December should afford the chancellor a slightly more comfortable night’s sleep over the weekend”, Sam Alderson, an economist at consultancy CEBR, said.

The official retail figures will add to concerns that the United Kingdom economy struggled in the second half of 2015, mirroring a slowdown in the global economy that has panicked financial markets. It was expected to decline moderately to GBP 10.5 billion. Economists had forecast an annual growth of 3.5 percent.

Economists had expected the ONS measure to fall in December, following a jump in sales in November.

“The disappointing December retail sales data follows on from recent news of falling industrial production and construction output in November, and an ongoing weak net trade performance”.