What's going on?

Sales of goods at British stores fell more than expected in December, which could be an early warning that Brexit is beginning to bite!

What does this mean?

Price increases have been accelerating in Britain in recent months (inflation is at its highest level in two years). The fear is that this will lead to people buying fewer things, which could be exactly what drove December�s retail sales down more than expected. Another possibility is that the data was skewed by the increasing popularity of American-style �Black Friday� discounts at the end of November, which brought forward consumers� spending and consequently weakened December�s sales (positive results from some of the UK�s biggest retailers leading up to Christmas support this interpretation). So, Friday�s data is far from conclusive, but it could be an early sign of a weakening UK consumer.

Why should I care?

The bigger picture: This is a bit of bad news in an otherwise (relatively) strong fourth quarter for the UK economy.

Most data in the fourth quarter of 2016 suggested that the UK economy was growing at least as quickly as it was earlier in the year: at an annualized rate of just over 2%. That�s pretty good by relative standards (slightly better than both the eurozone and the US). The question is whether the economic environment is getting tougher now � and whether that will stall the economy�s momentum in 2017.


For markets: UK-focused companies are at risk of an economic slowdown.

Many of the largest companies listed on the London Stock Exchange do the vast majority of their business outside of the UK (e.g. big pharmaceutical firms and miners), and as a result are insulated from the UK economy. However, other big companies like banks (e.g. Barclays), retailers (e.g. Tesco) and homebuilders (e.g. Persimmon) are highly exposed to the domestic environment � and their stocks are likely to come under pressure if the UK economy turns sour.