UK retail sales growth slows in December

Friday 10 January 2014 13.21
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The British Retail Consortium said shoppers spent 1.8% more in December than a year earlier
The British Retail Consortium said shoppers spent 1.8% more in December than a year earlier
Output for both UK manufacturing and industrial production was flat in November
Output for both UK manufacturing and industrial production was flat in November

Britain's economic recovery got a "reality check" today when data showed weaker than expected manufacturing output, a sharp fall in the construction sector, and a slowdown in retail sales growth.

Economists said growth in the fourth quarter might now struggle to keep up the pace which has made Britain one of the fastest-growing economies among the world's rich nations.

Official data was not seen matching up with strong industry surveys.

Output for both manufacturing and industrial production was flat month-on-month in November, and October's increases were revised down, the Office for National Statistics said.

Economists in a Reuters poll had expected increases of 0.4% for manufacturing and industrial output in November.

The ONS also said output in Britain's construction sector shrank by 4% in November from October, its sharpest fall since June 2012 and a setback for a sector which has been recovering from a long slump.

The Bank of England has forecast economic growth of 0.9% in the three months from October to December and today's data could help underscore its message that it is in no rush to raise record-low interest rates.

Adding to the sense of a recovery struggling to stay in high gear, a separate survey showed British retail sales growth slowed in December. 

A first estimate of Britain's economic growth in the fourth quarter is due to be announced on January 28.

Britain staged a surprisingly strong recovery in 2013 after struggling to get over the financial crisis. But the economic turnaround has depended largely on spending by consumers, many of whom have been buoyed by a recovery in the housing market while earnings fail to keep up with inflation.

A survey today from the British Retail Consortium showed that sales in the busy shopping month of December were 1.8% higher on the year compared with a 2.3% increase in November.

"While confidence levels were higher than the previous year, this wasn't always matched by more money in pockets," BRC Director-General Helen Dickinson said.

The outlook for Britain still contrasts starkly with grim forecasts of a return to recession at the start of last year. The economy is expected to expand by 2.8% this year, according to the Bank of England. 

There have been some early signs of a long-awaited shift towards more sustainable growth based on exports and business investment.

Data yesterday showed that while the country's trade deficit remains wide, goods exports rose to several other European countries, many of which are only starting to emerge from the region's debt crisis.

However, British manufacturing remains 8.5% smaller than its peak in 2008, before the financial crisis.

Weighing on overall industrial production in November was a 3% fall in oil and gas extraction compared with October, largely caused by reduced output at Total's St Fergus onshore North Sea gas terminal, ONS officials said.