Fri, 17 Jan 2025

Shock drop in shop sales adds to worries over UK economy

Sales unexpectedly fell last month, due to a poor December for food sales in supermarkets.
UK retail sales fell by 0.3% in December, worse than expected, due to weak food sales which dropped to their lowest level in over 10 years. However, clothing shops and department stores saw an increase in trade. The disappointing figures come after sluggish economic growth data, but are offset by a report from the International Monetary Fund (IMF) upgrading its forecast for UK growth this year to 1.6%. The pound initially slipped against the dollar following the release of the retail sales figures, but later recovered. Expectations of an interest rate cut by the Bank of England next month led to a rise in share prices and sent the FTSE 100 stock index to a record high. Chancellor Rachel Reeves has faced intense scrutiny over her economic plans, with Labour calling for growth as its key objective. In response, regulators suggested loosening rules on mortgage lending to boost borrowing for homebuyers. The retail sector's poor performance was driven by falling sales volumes in supermarkets, butchers, bakers, and shops selling alcohol and tobacco/vaping products also struggled. Despite this, the UK's two largest grocers, Tesco and Sainsbury's, reported strong trading over the festive period. Economists described the retail sales figures as "disappointing" for the sector, which typically seeks to make the most money in the months leading up to Christmas. However, they believe the economy has "very little momentum at the end of last year", but expect growth to pick up this year with an increase in households' disposable income and consumer spending.
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