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LONDON--The crucial Christmas trading period failed to give the U.K.'s struggling retail sector a significant boost, data showed Tuesday, adding to fears that the economy contracted in the final quarter of last year.
The British Retail Consortium's monthly retail-sales monitor showed same-store sales--which exclude sales from shops that opened or closed during the preceding year--rose 0.3% on the year in December after rising 0.4% in November.
Total sales, which includes sales at stores that have opened in the past 12 months, rose 1.5% on the year in December, compared with an increase of 1.8% in November.
Retail sales provide an indication of overall consumer spending, which is one of the most important determinants of the U.K.'s economic performance.
The BRCsaid overall sales in December only just managed to grow compared with last year on the back of online sales and a late surge in shopping on the last weekend before Christmas, highlighting the now-familiar game of brinkmanship between shoppers seeking better bargains and retailers holding out for full-priced sales.
Retail sales were subdued for most of 2012 with consumers reluctant to spend in the face of stagnant wage growth, relatively high inflation, and the government's ongoing austerity measures
"Against the relentlessly tough economic backdrop and low expectations, these results are not a cause for celebration, but not a disaster either," said Helen Dickinson, the BRC's newly appointed director general. "Total sales growth for December hasn't beaten inflation and is only on a par with December 2010, when severe weather put sales on ice for much of the month."
The U.K. retail sector has also become polarized as some retailers adapt better to the challenging conditions than others. This was highlighted Monday when supermarket Wm. Morrisons PLC (MRW.LN) reported a 2.5% decline in same-store sales over the Christmas period, while in contrast, clothing retailer Next PLC (NXT.LN) last week said its Christmas sales rose 3.9%. The differentiator was the internet: sales at Next were buoyed by its popular online and directory business, while Morrison cited a lack of an online grocery presence as one reason for its disappointing performance.
The BRC said online sales in December rose 17.8%, a return to form after an average 11% rise over the course of the year.
The BRC's overall subdued retail sales picture follows a survey of purchasing managers released Friday that showed activity in the U.K.'s dominant services sector fell for the first time in two years in December.
Markit, a data provider that conducts that and similar surveys for the manufacturing and construction sectors, said the results marked the weakest performance for three-and-a-half years, and were consistent with the economy shrinking about 0.2% on a quarter-to-quarter basis during the three months to December.
The economy returned to growth in the third quarter of 2012--after shrinking for the previous nine months--but that pickup was fueled by one-off factors like the Olympic Games and economists are concerned it could contract again in the final three months of the year.
The Office for National Statistics will release fourth-quarter gross domestic product figures Jan. 25.
A survey from the British Chambers of Commerce, also published Tuesday, provided a slightly more optimistic view of the economy's performance in the fourth quarter.
The BCC's quarterly survey, which polled more than 7,500 U.K. business, found the economy grew slightly in the fourth quarter compared with the third.
"We expect a modest GDP recovery in 2013 and 2014, but it is clear that U.K. growth remains inadequate and must be boosted further," David Kern, BCC chief economist said.
Manufacturers and service providers reported that both domestic sales and export orders picked up during the fourth quarter compared with the previous one.
In another small boost for the U.K.'s economic prospects, the U.K. Society of Motor Manufacturers and Traders Monday said the new car market rose 5.3% in 2012 to 2.04 million units, its highest since 2008. The organization said it anticipates this year's performance will be on a par with 2012.
Analysts said the rise in car sales was boosted by people searching for more fuel efficient vehicles that will bring down the day-to-day cost of transport. However, the new car market remained 14.9% below the pre-financial crisis level in 2007.
In a development that could boost consumer confidence and spending if it were to be sustained, a leading measure of house prices from the Halifax recorded a 1.3% rise in December from November, although they fell 0.3% compared with the year earlier.
Write to Ainsley Thomson at email@example.com and Kathy Gordon at Kathy.Gordon@dowjones.com
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