Analysts were expected the latest ONS figures to show a 1.1% rise but instead the figures reveal the weakest sales for the month of December since 2007.
The slow increase in volume sales is blamed on shoppers being put off by price rises as retailers put up prices at the fastest rate for nine months in December, following six
months of falling prices.
Sales volumes were up 2.1% for the year, weaker than the 3% expected.
As a result, retail sales values were buoyant, rising 0.9% compared to November and 3.6% on the year.
Supermarkets Tesco, Morrisons and Sainsbury’s and electricals retailer Comet beat their forecasts over the Christmas trading period but warn that 2010 will remain challenging as consumers continue to feel the bite of the recession.
The Synovate Retail Think Tank (RTT) says that retail health is likely to deteriorate again given the uncertainties which lie ahead.
Richard Lowe, of Barclays retail & wholesale sectors and member of RTT, says: “Given the poor trading environment for most of 2009, the sector performed exceptionally well in Quarter 4. There is a good case for some of this momentum to continue into Quarter 1. However, there are several unknowns ahead which could destabilise or reverse the process. These include house prices possibly falling again, rises in or extension in the scope of VAT, higher interest rates, more direct taxes and the impact of the reversal of the £200 billion pumped into the economy via quantitative easing.”