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U.K. retail sales disappoint as high street stalls

Shoppers carry Primark bags on Oxford Street in London January 17, 2013.

NEIL HALL/Reuters

British retail sales dashed hopes on Friday of a Christmas boost for a struggling economy, falling on the month in December and growing the least on the year since April.

The latest official figures support the view that British national output shrank in the fourth quarter and point to a gloomy consumer mood that has shut three well-known chains since the beginning of the year.

The Office for National Statistics said sales volumes including automotive fuel fell 0.1 per cent on the month to give an annual rise of 0.3 per cent. Economists had forecast a 0.2 per cent monthly increase.

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The annual rise was the smallest since April and far below a forecast 1.1 per cent rise.

The pound fell to an 8-week low against the U.S. dollar while British government bond prices rallied after the release.

"The high street seems to have stalled again over the past few months," said Investec economist Philip Shaw.

"Recovery prospects will depend strongly on a pick-up in consumer activity over the first few months of 2013."

The main driver behind the monthly fall in sales was non-food retail, chiefly sales of household goods which dropped 3 per cent – the biggest fall since January 2010, the ONS said. Food sales, which fell 0.3 per cent on the month, also contributed to the weakness.

Consumer spending in Britain – some two-thirds of the economy – has taken a hammering from a combination of below-inflation wage growth, worries about the economy and government austerity measures.

Still, trading updates from six major British retailers on Thursday demonstrated that must-have gadgets, cheap fashion and internet sales were key to overcoming an otherwise tough festive season.

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The official data showed online and other types of non-store retail grew almost 12 per cent on the year in December. The share of internet trading continues to rise, and one industry survey has forecast it to grow another 12 per cent this year to £87-billion ($139-billion U.S.).

For some retailers this Christmas, a period when many make as much as half of their annual profit, was their last. Three household names in British retail have gone into administration since the start of the year, including 92-year-old music retailer HMV.

Boding ill for quarterly GDP numbers in the last quarter of 2012, retail sales fell 0.6 per cent between October and December compared to the previous three months – the biggest fall since August 2011.

The figures follow another survey by the British Retail Consortium, which showed that the total value of goods sold in December was up just 1.5 per cent on the year.

The ONS said retail sales excluding fuel fell 0.3 per cent on the month and were 1.1 per cent higher than in December 2011, compared to economists' forecast for rises of 0.1 per cent on the month and 2.1 per cent on the year.

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