-Martin Beck, EY ITEM Club
British retail sales dropped markedly last month amid higher prices, linked to the weaker Sterling. The Office for National Statistics reported retail sales dropped 1.9% in December, worse than an expected 0.1% fall. That was the largest decline since April 2012. Meanwhile, the November gain of 0.2% was revised down to –0.1%. December's weak retail sales most probably dampened economic growth in the last quarter of 2016. Markets suggest the economy grew at an annualized pace of 1.2% in the Q4, compared to the preceding quarter's 1.8%, since the British economy was mainly boosted by consumer spending since the June 23 referendum. In volume terms, annual ales fell to three-month lows of 4.3%, following November's 5.7%. Moreover, yearly shop price inflation hit 0.9%, the highest in three years, supporting the latest CPI report released by the ONS, which showed that consumer prices advanced 1.6%. In addition, earlier this week, the ONS reported that consumer prices rose at a stronger than expected pace last month. The weak December figure showed a strong contrast with reports received from major retailers, who enjoyed a fruitful Christmas season. Even though retail sales posted the biggest monthly fall last month, they managed to climb 4.3% on an annual basis. Following the release, the Pound dropped against the US Dollar, trading at $1.23.
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