UK retail sales slide in December, capping tough year for consumers

* Sales shrink 1.5 pct mm, well below forecasts

* Biggest monthly drop since June 2016, worst Dec (Shanghai: 600875.SS - news) since 2010

* ONS says long-term picture is of slowing growth

* Pound slips and government bond prices rise on data

(Adds reaction, details)

By Andy Bruce and William Schomberg

LONDON, Jan 19 (Reuters) - British shop sales slid by much

more than expected in December, capping off the weakest year for

retail since 2013 as consumers squeezed by the Brexit hit to

prices continued to keep a tight grip on spending.

Retail sales volumes dropped 1.5 percent from November, the

Office for National Statistics (ONS) said, well below

economists' forecasts of a monthly dip of 0.6 percent in a

Reuters poll, and more than reversing a 1.0 percent rise in

November.

That marked the biggest month-on-month fall since June 2016,

the month Britons voted to leave the European Union, as well as

the weakest December performance for seven years.

Britain's economy slowed in 2017 as higher inflation -

caused by the post-referendum fall in the pound - hurt the

spending power of consumers, although forecasts of a bigger hit

to growth were confounded.

Friday's data pushed the pound down against the dollar and

British government bond prices hit a session high.

The Bank of England, which is considering when to follow up

on November's first rate hike in a decade, expects the squeeze

will ease in 2018 as inflation cools and wage growth ticks

higher. Recent surveys of consumers suggest they do not share

the central bank's optimism right now.

"The longer-term picture is one of slowing growth, with

increased prices squeezing people's spending," ONS statistician

Rhian Murphy said about Friday's data.

Many shoppers brought forward their Christmas spending into

November to take advantage of Black Friday sales promotions, the

ONS said.

Black Friday promotions have become commonplace in Britain

only in the last few years, making it difficult for the ONS to

adjust its data so figures for November and December can be

compared easily from year to year.

But whatever distortions were caused by Black Friday sales,

analysts were doubtful it did retailers any good.

"All of this discounting is likely to have decimated profit

margins and retailers will be counting the cost," said Richard

Lim, chief executive at consultancy Retail Economics.

On Friday, Britain's biggest floor coverings retailer

Carpetright (Other OTC: CGHXF - news) lost almost half of its stock market value

after it warned on its full-year profits, blaming a drop in

consumer confidence.

Retailers have reported mixed fortunes over the Christmas

period.

Last week Britain's biggest retailer Tesco (Frankfurt: 852647 - news) missed

forecasts for Christmas trading as strong food sales were

undermined by weak demand for general goods such as DVDs and

computer games. Discount supermarkets saw strong growth.

Looking at the fourth quarter as a whole, which smooths out

monthly volatility in the data, the ONS said sales growth slowed

to 0.4 percent, compared with 0.8 percent in the third quarter.

As a result, retail sales will contribute almost nothing to

economic growth in the last three months of 2017.

Retail sales volumes for 2017 as a whole grew by 1.9

percent, a far cry from the 4.7 percent increase in 2016 and

marking the weakest full-year performance since 2013.

In annual terms, retail sales volumes grew 1.4 percent in

December, weaker than all forecasts in the Reuters poll. Sales

in November grew 1.5 percent.

(Reporting by Andy Bruce; editing by Andrew Roche)