UK store sales unexpectedly fell in the run-up to Christmas amid a "very bad month" for supermarket food sales, adding to concerns about the health of the UK economy.

According to official data, sales fell 0.3% in December, well below expectations for a 0.4% rise.

Food sales fell to their lowest level in more than a decade last month, but trade at clothing stores and department stores increased.

The weak economic growth data came despite an International Monetary Fund (IMF) report late on Friday upgrading its forecast for UK economic growth this year.

The pound fell to $1.216 immediately after the retail sales data was released, but later recovered to $1.22. Ten-year government borrowing costs have also fallen further from their recent peaks as expectations grow that the Bank of England will cut interest rates next month.

Expectations of interest rate cuts also pushed up share prices, with the FTSE 100 index of Britain's largest listed companies hitting a record high on Friday.

The moves come as Chancellor Rachel Reeves' economic plans face intense scrutiny.

Labor has made growth its main goal, but figures released on Thursday showed Economy flattensprompting Reeves to admit the government must "do more to grow our economy" to improve living standards.

Responding to calls to boost growth, regulators recommend tougher mortgage rules Policies can be relaxed to allow more people to borrow money to buy houses.

According to the Office for National Statistics (ONS), the hit to retail last month was caused by falling sales in supermarkets, but butchers and bakeries, as well as liquor and tobacco/vaping shops, also struggled.

However, the fall in supermarket sales does not appear to have affected Tesco and Sainsbury's, the UK's two largest grocers. Both reported strong trading over the holiday period.

The ONS said sales at clothing and footwear stores rose by 4.4%, rebounding from declines in November and October and reflecting a sharp increase in spending in the run-up to Christmas.

Economists said Friday's retail sales data provided a "disappointing" outcome for the sector into late 2024, a period when businesses typically seek to make the most money to survive quieter trading month.

Danni Hewson, head of financial analysis at AJ Bell, said: "With pressure mounting on the chancellor to deliver growth, news that retail sales fell across all months in December is unwelcome to say the least."

Alex Kerr, UK economist at Capital Economics, said the weaker-than-expected data was "further evidence that the economy lacked momentum at the end of last year".

But he added that this was "not a sign of things to come".

"We doubt the recent downturn in the economy will persist," he said, adding that he expected households' disposable income to rise this year, which would boost consumer spending.

In its latest World Economic Outlook, the International Monetary Fund predicts that the British economy will grow by 1.6% in 2025, higher than the 1.5% forecast in October last year.

The global economic body also predicts that Britain's economic growth will exceed that of other European economies such as Germany, France and Italy over the next two years.

After making the forecast, Reeves highlighted that the UK was the only G7 economy besides the US to upgrade its growth forecast.

However, many businesses have criticized measures announced by the Chancellor in the Budget that will increase the National Insurance rates paid by employers and lower the threshold for payments from April. The minimum wage is also rising.

Next boss Lord Wolfson told the BBC the changes could achieve this "It's harder for people to enter the labor market."

Lisa Hooker, consumer markets industry leader at PwC, said price inflation is likely to return in 2025 as retailers pass on rising operating costs.