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U.K. retail sales rebounded sharply in December, signaling a return of consumer confidence after months of caution surrounding the Autumn budget and giving the Bank of England fresh food for thought ahead of its February policy meeting.
Monthly sales rose 0.4%, reversing November’s decline, while annual growth surged to 2.5%—well above expectations and the strongest pace in months. Economists had forecast flat monthly growth and just a 1% annual increase.
The late-year pickup suggests households began spending again after holding back in October and November, when uncertainty over tax rises and government plans dampened sentiment.
The data lands at a delicate moment for policymakers. The BoE cut rates to 3.75% in December, but inflation surprised to the upside this week, rising to 3.4% in December. While analysts see that jump as driven by temporary factors, the combination of firmer spending and sticky inflation could complicate the case for near-term rate cuts.
The central bank’s next decision is due on February 5.
