British Retail Sales Dropped in November

U.K. retail sales unexpectedly fell in November for the first time in six months as the recession prompted consumers to spend less at clothing and department stores in the approach to Christmas.

Sales dropped 0.3 percent on the month after rising 0.6 percent in October, the Office for National Statistics said today in London. The median forecast was for a 0.5 percent gain, according to a Bloomberg News survey of 28 economists.

The U.K. faces a "bumpy and uneven" path out of recession as unemployment keeps increasing, Bank of England policy maker Kate Barker said in an interview this week. The central bank has kept its benchmark interest rate at a record low and pledged to spend as much as 200 billion pounds ($327 billion) on bonds to aid the economy.

"Consumers remain under pressure and they're not going out and splurging before Christmas," said Peter Dixon, an economist at Commerzbank AG in London. "The Bank of England won't be panicking on the back of this. If we do get a rebound in mid- December going into January, this will just be seen as a blip."

The pound fell as much as 0.4 percent after the release of the data and traded at $1.6164 as of 9:42 a.m. in London. The yield on the two-year gilt fell as much as 3 basis points and traded at 1.217 percent.

Non-food sales fell 0.9 percent in November, outweighing a 0.4 percent increase in food sales, the statistics office said. Clothing and department stores led the drop. On the year, sales rose 3.1 percent after gaining 3.7 percent in October.

'Cautious' on Christmas

JJB Sports Plc (JJBSF), the unprofitable sporting goods retailer, said today that it was "cautious" about its performance over Christmas and the New Year and trading will "remain difficult." Tesco Plc (TSCDY), the world's third-largest retailer, on Dec. 8 reported slowing sales growth that missed analysts' estimates.

The economy has lost more than 600,000 jobs since the recession began, with the axe falling hardest on people under the age of 24. The effects of the slump will also be felt with more increases in unemployment that may continue to rise for several more quarters, Barker said.

The weakness of the job market is making it harder for Prime Minister Gordon Brown to resuscitate his popularity in time for an election which he must call by June. Barker said on Dec. 15 that it is possible the economy may see another quarter of contraction and that pressures on inflation are mainly "downward."

Policy makers are trying to prevent inflation from undershooting the 2 percent target in the medium term. Inflation accelerated to 1.9 percent in November and will pick up before then dipping below the goal, the central bank's forecasts show.

The retail price deflator, a measure of cost changes, showed a 0.5 percent annual drop in November, the statistics office said today.

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