By Andy Bruce and Suban Abdullah

LONDON (Reuters) – Britain’s retail sales unexpectedly fell in December, according to data on Friday that raised the risk of an economic slowdown in the fourth quarter, adding to the challenges facing the finance minister. finance Rachel Reeves.

Retail sales, adjusted for the inclusion of Black Friday sales at the start of the month, fell 0.3% month-on-month in December after a modestly revised 0.1% expansion in November. , the Office for National Statistics said.

Sterling fell a quarter of a cent against the dollar after the data, falling to as low as $1.22, and gilt yields fell – reversing a spike last week that briefly prompted comparisons to panic. in the market seen after the 2022 “mini-budget” of former prime minister Liz Truss.

Economists polled by Reuters forecast a monthly increase in retail sales of 0.4%.

Friday’s figures added to a run of poor economic data since Reeves announced Britain’s biggest tax hike since 1993 in his October budget, and boosted expectations for an interest rate cut by the Bank. of England next month.

Retail sales for the fourth quarter as a whole fell by 0.8%, pushing economic growth to around 0.04 percentage points in the quarter, the statistics office said.

With growth flatlining in the three months to November, the contribution of retail sales alone could be enough to tip the economy into contraction in the fourth quarter, assuming no offsetting growth from other areas of the economy.

“The softening of sales will add to the disappointment from the November GDP report earlier this week, which suggested the economy stagnated in Q4 or may have contracted slightly,” said Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics.

“The (BoE) has a window of opportunity to cut rates in February which we expect them to take.”

Retail sales data is volatile and volatile, especially for December readings that tend to be revised upward, according to records dating back to 2019.

Excluding motor fuel, retail sales fell 0.6% in the month, the data showed.

“This was driven by a bad month for food sales, which fell to their lowest level since 2013, with supermarkets particularly affected,” said senior statistician Hannah Finselbach.

Total (EPA:) retail sales were 3.6% higher than a year ago, compared to a median forecast for 4.2% annual growth.