UK retail sales fall 0.3 in December vs forecast 0.4 rise
Data raises risk of economic contraction in Q4
Sterling, gilt yields fall on Bank of England rate cut bets

LONDON, Jan 17 Reuters British retail sales fell unexpectedly in December, according to data on Friday that raised the risk of an economic contraction in the fourth quarter, adding to the challenges facing finance minister Rachel Reeves.

Retail sales, adjusted for the inclusion of the Black Friday sales at the start of the month, fell by 0.3 monthonmonth in December after a downwardly revised 0.1 expansion in November, the Office for National Statistics said.

Sterling fell a quarter of a cent against the dollar after the data, dipping below 1.22, and gilt yields slumped reversing a spike last week that briefly prompted comparisons with the market mayhem seen after former prime minister Liz Truss39;s 2022 minibudget.

In a BBC podcast on Friday, Reeves said she was tuning out her critics and would continue making difficult decisions in an effort to grow the economy.

Economists polled by Reuters had forecast a monthly increase in retail sales of 0.4.

Friday39;s figures add to a run of lacklustre economic data since Reeves announced Britain39;s biggest tax rises since 1993 in her October budget, and boosted expectations for a Bank of England interest rate cut next month.

Retail sales for the fourth quarter as a whole fell by 0.8, exerting a drag on economic growth of around 0.04 percentage points over…