The Office for National Statistics said retail sales volumes rose 0.3 percent last month, less than a third of the 1.1 percent rise analysts had expected and the weakest for the month of December since 2007. On the year, sales volumes were up 2.1 percent, also weaker than the 3.0 percent expected and the lowest annual rate for a month of December since 1998.
Official data next week is expected to show the economy returned to growth in the last three months of 2009 after 18 months in recession, but some analysts fear Friday's data point to a weaker reading than the consensus for 0.4 percent growth. "December's modest rise in UK retail sales is disappointing given the far more upbeat tone of the surveys and trading updates," said Vicky Redwood at Capital Economics.
Bank of England Governor Mervyn King warned this week that British households were likely to feel the painful after-effects of recession - such as higher unemployment and meagre wage growth - for some time to come, suggesting he is no hurry to start tightening policy.
Friday's figures help explain that pick-up and indicate retailers were keen to rebuild margins after six months of discounting and heavy price cuts last Christmas, when the sudden economic downturn forced stores to slash prices to shift stock. Retailers hiked prices at their fastest rate in nine months, in December by 1.2 percent compared with the previous year. That compared with prices in November which were 0.6 percent lower on the year, while prices in December 2008 were down 1.8 percent on the year.