The Office of National Statistics revealed that the retail sales of UK have dipped considerably due to chilly weather and hike in food prices. The volume of retail sales fell 0.8% in the last month of 2010, erasing all the previous gains made during the holiday season. This has been the weakest annual recording of retail sales after 1998.

The retail sales figures for December have been worse-than-expected in 2010. Otherwise, the sales numbers for December mark highest growth every year.
Food retailers have faced the biggest brunt as December food-store sales have been as low as 0.9% and 3.4% annually.

Kate Davies, ONS Statistician said, "One factor to blame was that December 2010 was the coldest December in 100 years,"

"Another factor was a 5% rise [year-to-year] in prices of goods sold at food stores,” added Davies.

Interest rate issue
Inflation rate in the UK has jumped to 3.7% on concerns that the Bank of England will hike interest rate way prior than expected. Moreover, looking at the retail sector developments, it is unlikely that the economic outlook of the UK will show any concrete improvement.

Council of Mortgage Lenders (CML) said that the there will be a major hike in the mortgage markets if the bank raises the interest rate.

Peter Charles, Chief Economist from the CML said, "Against this backdrop, consumer demand may be weaker than we would otherwise have expected,"

"Higher interest rates will also hit the budgets of existing borrowers, although the expected modest rises in the base rate will result in a relatively small proportionate rise in monthly payments for most mortgage holders,” added Charles.