Retail sales fell sharply as prices jumped before Christmas

Retail sales suffered their biggest monthly fall since April 2012 last month, with official figures also charting a leap in prices compared to December a year earlier.

The Office for National Statistics (ONS) reported a 1.9% decline in sales volumes on November - the month containing the Black Friday bonanza - with clothing, footwear and household goods driving the fall.

The picture was more positive on an annual basis with growth for the retail sector of 4.3% on December 2015.

However, both figures were well below the expectations of economists.

The ONS said the performance over the final three months of the year was strong enough to add 0.1% to fourth quarter economic growth - with the first estimate on how UK PLC performed as a whole due next week.

Small, independent retailers - butchers in particular - had a strong December, the statisticians said.

In charting a particular struggle for non-food retailers in December - the ONS also noted a 0.9% hike in retail prices last month compared to December 2015 as stores came under pressure to pass on rising costs.

A leap in inflation to an annual rate of 1.6% was reported earlier this week by the country's official number crunchers amid predictions store prices will soar this year as retailers juggle the effects of weaker sterling that has left imported goods more expensive.

The pound has fallen up to 20% versus the dollar alone since the EU referendum. It lost half-a-cent on the back of Friday's retail figures to stand at $1.2290.

A string of major retailers have used their Christmas trading updates to warn of higher prices and uncertainty ahead though a few, including Burberry, have benefited from an influx of foreign tourists taking advantage of the currency shift.

The vast majority - especially major supermarkets - have reported positive sales figures and the body representing the retail industry as a whole had declared Christmas 2016 as largely successful.

The British Retail Consortium's (BRC (Shanghai: 600466.SS - news) ) Shop Price Index had reported a 1.4% decline in prices last month compared to a year earlier - in stark contrast to the 0.9% increase recorded by the ONS.

That said, the BRC has admitted prices are on course to go up - with deflation, annual price falls, in the food sector already diminishing.

Economists and retail analysts believe higher prices will limit consumer spending - the biggest driver of economic growth since the financial crisis.

Peter Hollingsworth, UK economist at Capital Economics, said: "The slowdown in spending growth should help to calm fears that low interest rates are driving an unsustainable credit-fuelled consumer boom and we expect spending growth to lose some more pace over the coming year as inflation picks up and squeezes growth in households real incomes.

"But with interest rates set to remain low and the cost of servicing debt very manageable, as well as strong confidence by past standards, we expect spending growth to slow, rather than grind to a halt."