UK retail sales show surprise gain in December on food, fuel

[LONDON] British retail sales unexpectedly rose in December as shoppers flocked to supermarkets and bought more fuel on the back of falling oil prices, official data showed on Friday.

Economists had expected sales to be weaker after consumers took advantage in November of the country's first major round of U.S.-style Black Friday sales.

But retail sales volumes rose 0.4 per cent on the month after surging by 1.6 per cent in November, the strongest growth in more than a decade.

Sales rose 4.3 per cent in December compared with the same month a year ago, the ONS said.

Economists had expected a fall of 0.6 per cent on the month, after the Black Friday sales brought forward some Christmas shopping into November, and a gain of 3.0 per cent on the year.

In the three months to December, a smoother reading than the often volatile monthly changes, sales jumped 5.0 per cent from the same period a year earlier, the biggest increase in more than 10 years.

Consumer spending has driven Britain's strong economic recovery which began in mid-2013 and is likely to remain its main engine as demand for exports remains weak due to the slowdown in the euro zone.

Wages are showing some signs of recovery after growing by less than inflation for much of the period since the financial crisis, and consumer prices are barely rising, boding well for spending power this year.

The buoyant mood amongst consumers could also help Prime Minister David Cameron who is facing national elections in May.

There were signs of some impact of November's Black Friday sales in the December data. Department stores said sales volumes fell by 4.5 per cent on the month, the worst performance since January 1996, and they reported their first decline in online sales, in year-in-year terms, since records began in January 2008.

A survey from the British Retail Consortium last week, which covers a smaller section of retail spending than the ONS figures, had shown growth in high-street spending weakened in December.

The ONS said on Friday that prices in stores fell by 2.2 per cent in December compared with a year earlier, the biggest drop since June 2002.

Prices in food stores fell 0.9 per cent, probably reflecting a price war between supermarkets as well as falling global commodity prices.

Sales volumes excluding fuel rose by 0.2 per cent, half the pace of growth in overall sales, suggesting consumers were taking advantage of low oil prices to buy more fuel.

The retail sector accounts for nearly 6 per cent of the British economy.

REUTERS