* UK retail sales cool slightly in Dec, despite Christmas
* Retailers expect prices to spiral higher in next few
* EC survey shows record increase in shop price inflation
(adds European Commission figures)
By James Davey and Andy Bruce
LONDON, Jan 6 A spending spree by British
shoppers in the week before Christmas failed to prevent sales in
December from falling short of the previous year's level, while
shop prices are expected to surge in 2017, surveys showed on
Robust growth in consumer spending has been one of the main
factors sustaining Britain's economy since last June's vote to
leave the European Union. But many retailers fear a squeeze on
spending as inflation begins to erode real earnings growth in
Monthly surveys from accountancy firm BDO and the European
Commission (EC) showed retail sales slowed in December, with the
latter showing a record jump in retailers' price expectations.
Like-for-like retail sales in December fell 0.1 percent
year-on-year, according to BDO. However, online sales in the
month rose 19 percent year on year, further evidence of a shift
in shopping habits.
"With such a weak base for December 2015 (when sales fell
5.3 percent) any further decline can only be seen as a poor
result for retailers," said Sophie Michael, head of retail and
wholesale at BDO.
"Coming at a critical juncture, this fourth negative
December in succession highlights the magnitude of the challenge
that lies ahead for 2017, when consumers will more keenly feel
the bite of inflation and the weaker pound," she added.
The pound is still down around 12 percent on a
trade-weighted basis since the vote for Brexit on June 23. Bank
of England chief economist Andy Haldane said on Thursday the
effect of sterling's slump was starting to trickle into higher
The EC's gauge of UK retailers' price expectations for the
coming months more than doubled between November and December, a
record increase to levels nearing the all-time highs reached in
2011, the last time consumer price inflation topped 5 percent.
The mixture of burgeoning inflation pressure and strong
consumer spending leaves the Bank of England with a balancing
act between trying to keep prices under control while supporting
BDO said that in the week leading up to Christmas Day sales
increased 11.7 percent year on year - the largest weekly growth
figure for the whole of 2016. However, the outcome partly
reflected Christmas Day falling on a Sunday.
On Wednesday clothing retailer Next, the first major
British retailer to give an update on Christmas trading, cut its
profit forecast for the current financial year and warned of a
further decline in 2017-18.
The British Retail Consortium is scheduled to publish
December sales data on Jan. 10. Official data for the month is
published on Jan. 20.
Next week will also see a raft of Christmas trading updates,
including from supermarkets Morrisons, Sainsbury's
and Tesco and from Marks & Spencer,
Debenhams and ASOS.
(Graphic by Andy Bruce, Editing by Keith Weir and Adrian Croft)