U.K. retail sales decline in December, CPI inflation likely to drift lower in coming months

U.K. Retail sales came in weak in December after months of resilience. Retail sales dropped 1.5 percent in the month, below consensus expectations of a decline of 1 percent. Ahead of today’s release, surveys of retail activity from both the BRC and CBI along with disappointing reports from retailers had indicated towards the possibility that retail sales volumes would be down in December, noted Lloyds Bank in a research report. But, some of the softness in December probably reflects shifting spending patterns.

Even after December’s fall, the strong outturns in both October and November, retail sales volumes were up over the quarter, although at a slower rate than in the third quarter. Looking ahead, the outlook for spending over the months ahead and quarters depends greatly on developments in U.K. household finances, stated Lloyds Bank.

CPI inflation is expected to have peaked and is likely to drift lower in the months ahead, albeit at a very slow rate. Furthermore, the tightness of the U.K. labor market is likely to result in some acceleration in wage inflation in the months ahead, added Lloyds Bank.

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