Worst December retail sales since records began

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Terrible winter weather and rising prices kept shoppers away from the high street and prompted the worst December retail sales on record, official figures revealed yesterday.

Retail sales remained flat compared with the previous December, which was the worst annual performance for the month since the Office for National Statistics (ONS) started tracking the data in 1988. Consensus forecasts had predicted a 1.4 per cent sales rise.

The shocking performance saw sales volumes fall by 0.8 per cent between November and December, which was sharper than analysts expected and outweighed the lift that was forecast ahead of the VAT rise in January.

It fuelled fears that the weaker- than-expected figures could severely drag on GDP growth in the fourth quarter, especially with the services and construction industries also hit by the adverse weather. Analysts at JP Morgan believe the UK economy grew by just 0.1 per cent in the three months to the beginning of January.

The ONS found that the coldest December temperatures for a century had a significant impact on footfall in a critical month for retailers, which has been borne out by a series of disappointing trading updates from high-street chains including HMV, Mothercare and Comet. The ONS recorded the largest drop in food store sales since records began in 1988, as higher prices knocked demand. Food store volumes were down 3.4 per cent last month compared with a year earlier, and fell for the 11th month in a row. Fuel sales in December were 5.9 per cent lower than in November – the biggest monthly fall since January last year.

Clothing and footwear shops took a smaller hit, with sales 0.2 per cent lower than in November. Volumes at household goods retailers fell 0.9 per cent.

However, Barry Knight, the head of retail at the accountancy group Grant Thornton, said there were some winners. "The cold benefited outdoor clothing retailers such as Blacks as consumers purchased warm jackets," he explained. "Their high street presence captured those unable or unwilling to get in their cars."

He added that "one-stop shops", including department stores such as House of Fraser and supermarkets including Sainsbury's also enjoyed a boost in sales as "shoppers avoided trudging from store to store in the cold".

Malcolm Barr, of JP Morgan, said: "The breakdown of the data suggests use of the internet contributed significantly to getting the Christmas shopping done even when the car was snowed in".

Online sales surged, accounting for about 10.6 per cent of all retail sales. The average weekly value of internet shopping hit £770m in December, up from £620m the previous month.

The Centre for Economics and Business Research said: "We expect 2011 to be, at best, a stagnant year for household consumption, as individuals face a double squeeze from high inflation and weak disposable income growth."