LONDON- British consumers failed to increase their spending for a record fifth month in a row in December, adding to signs of economic weakening that might prompt the Bank of England to cut interest rates this month.
Official data on Friday showed sales volumes fell by 0.6 percent from November, defying the median forecast for a rise of 0.5 percent in a Reuters poll of economists.
Sales in monthly terms have not risen since July, the longest such run since records began in 1996, the Office for National Statistics said, adding that food sales fell by the most in three years.
Sterling weakened and British government bond prices rose as investors increasingly bet on the Bank of England cutting rates on Jan. 30, at the end of its next meeting.
Two of its nine policymakers voted in November and December for a cut and three others, including Governor Mark Carney, have said lower borrowing costs might be needed soon.
Friday’s figures are the first hard data that suggest a bounce in consumer sentiment since Conservative Prime Minister Boris Johnson’s landslide election win on Dec. 12 might not have fed through into actual spending.
“December’s outright fall in retail sales, despite a potential boost from the lateness of Black Friday, does not bode well for GDP growth in December and could nudge the Monetary Policy Committee closer still to cutting rates at the end of the month,” said Thomas Pugh, an economist at Capital Economics.
“But the election and the removal of some uncertainty could represent a turning point for the economy. Indeed, there are signs that sentiment has already turned up. As a result, January might not be quite as bad.”
Allan Monks, a JP Morgan economist, said the weak picture of the economy in late 2019 meant surveys of businesses for January due next week would have to send a very clear signal of an imminent improvement to prevent a rate cut on Jan. 30.
Annual growth in retail sales volumes dropped to 0.9 percent, below all forecasts in the Reuters poll.
The also ONS revised down its sales data for November. In the fourth quarter as a whole, it found that volumes fell by 1.0 percent, their worst performance since early 2017.
The survey period ran from Nov. 24 to Dec. 28, including the Black Friday and Cyber Monday sales promotions and the Dec. 12 election. – Reuters
