UK retail sales recover weakly in December, borrowing jumps

By David Milliken and Andy Bruce

LONDON (Reuters) – British retail sales bounced back weakly in December as shops in England emerged from November’s four-week lockdown to slow the spread of COVID-19, while public borrowing this financial year has hit a fresh record high.

Retail sales volumes rose 0.3% in December, far less than economists’ expectations in a Reuters poll for a 1.2% increase, leaving them 2.9% higher than a year earlier, official figures showed on Friday.

But for 2020 as a whole, retail sales were down 1.9% – the biggest calendar-year fall on record – and clothing sales slumped by more than a quarter.

Sterling fell slightly against the dollar and the euro following the weaker-than-expected retail numbers.

Public sector borrowing for December came in at 34.1 billion pounds ($46.65 billion), just above economists’ forecasts of 32.1 billion pounds, taking borrowing since the start of the financial year in April to a record 270.8 billion pounds.

December had offered a partial respite for Britain’s economy, which has seen sharper falls in its official measure of output than any other advanced country, as well as Europe’s highest death toll from COVID-19.

In November the economy shrank 2.6%, due to a four-week lockdown in England and similar measures in other parts of Britain.

This month the government went further and shut schools as well as non-essential retailers – which most economists think will lead to the economy contracting in the first quarter.

Experimental data from the ONS on Thursday showed consumer spending in early January was 35% lower than before the pandemic began in February – though the figures were not seasonally adjusted to reflect the typical post-Christmas lull.

Retail sales have performed better than other areas of consumer spending, with shoppers switching to online stores, where spending surged by 46.1% in 2020.

Public borrowing continues to surge, with furlough payments to millions of households supporting spending and keeping unemployment down for now.

Government forecasters in November predicted borrowing would reach 394 billion pounds in the 2020/21 financial year, equivalent to 19% of GDP, the most since World War Two.

Friday’s data showed total public sector debt had reached 2.132 trillion pounds, equivalent to 99.4% of GDP, the most since the financial year ending 1962.

($1 = 0.7310 pounds)

(Reporting by David Milliken and Andy Bruce, Editing by Paul Sandle)