The UK’s retail sales recovery was smaller than expected in the key Christmas shopping month of November, official figures show.

Retail sales rose just 0.2% last month despite discounting events in the run-up to Black Friday. It followed a 0.7% fall seen in October, according to data from the Office for National Statistics (ONS).

Sales growth of 0.5% had been forecast by economists.

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Behind the fall was a steep drop in clothing sales, which fell 2.6% to the lowest level since the COVID lockdown month of January 2022.

Sales have still not recovered to levels before the pandemic. Compared with February 2020, volumes are down 1.6%.

It was economic rather than weather factors behind this as retailers told the ONS they faced tough trading conditions.

For the first time in three months, however, there was a boost in food store sales, and supermarkets in particular. It was also a good month for household goods retailers, most notably furniture shops, the ONS said.

Clothes became more expensive in November, data from earlier this week demonstrated, and it was these price rises that contributed to overall inflation rising again – topping 2.6%.

Retail sales figures are of significance as the data measures household consumption, the largest expenditure across the UK economy.

The data can also help track how consumers feel about their finances and the economy more broadly.

Industry body the British Retail Consortium (BRC) said higher energy bills and low consumer sentiment impacted spending.

The BRC’s director of insight Kris Hamer said it was a “shaky” start to the festive season.

Shoppers were holding off on purchases until full Black Friday offers kicked in, he added.

The period in question covers discounting coming up to Black Friday but not the actual Friday itself as the ONS examined the four weeks from 27 October to 23 November.

UK car manufacturing fell again in November, the ninth month of decline in a row, according to industry data.

A total of 64,216 cars were produced in UK factories last month, 27,711 fewer than in November last year – a 30% drop, according to data from the Society of Motor Manufacturers and Traders (SMMT).

The figures also mean it was the worst November for UK car production since 1980, when 62,728 vehicles were produced.

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It comes after the government launched a review into its electric car mandate – a system of financial penalties levied against car makers if zero-emission vehicles make up less than 22% of all sales to encourage electric vehicle (EV) production.

The mandate will rise to 80% of all sales by 2030 and 100% by 2035.

But car manufacturers have long expressed unhappiness with the target, saying the consumer demand is not there and EVs are costlier to produce.

Separate figures from the SMMT suggested a £5.8bn hit to the sector from the EV mandate.

Despite the criticism, EV sales goals were surpassed last month. One in every four new cars sold was an electric vehicle.

The impact of this reduced production could be visible in the last month from the announcement of 800 job cuts from Ford UK and Vauxhall‘s Luton plant closure.

The problems are not specific to the UK as European makers also face weaker EV demand than anticipated and competition from Chinese imports.

High borrowing costs and comparatively more expensive raw materials have worsened the problem.

Bosch – the world’s biggest car parts supplier – also reported the loss of 5,500 jobs last month, predominantly in Germany.

In October Volkswagen revealed plans to shut at least three factories in Germany and lay off tens of thousands of staff.

The Bank of England has maintained its guidance for “gradual” interest rate cuts next year, following surprise support for a reduction this month.

Its rate-setting committee, while deciding to keep Bank rate on hold at 4.75%, noted higher than expected wage rises and inflation despite a slowdown in the economy over the second half of the year.

However, three members backed a cut, meaning the vote came in at 6-3 in favour of no change.

Just one dissenting voice had been expected.

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Governor Andrew Bailey said: “We think a gradual approach to future interest rate cuts remains right, but with the heightened uncertainty in the economy we can’t commit to when or by how much we will cut rates in the coming year.”

Earlier this month, Mr Bailey voiced concerns about how businesses would react to budget measures, such as the hike to employer national insurance contributions from April.

Lobby groups and many individual firms have warned the additional costs will be passed on – risking further inflationary pressure.

Mr Bailey also noted a worry tit-for-tat trade tariffs would add to the acceleration in price growth. US president-elect Donald Trump has warned of tariffs covering all US imports as part of his agenda to protect US industry and jobs.

The Bank said on Thursday it was still evaluating the effects of the budget on the outlook.

It has also consistently spoken of the threat to rate cuts from salaries.

The Bank does not like wages going up too fast – currently at twice the rate of price growth – because it can fuel future demand in the economy and make inflation worse in the longer term.

Economists had been widely expecting four rate cuts in 2025 on the back of the two reductions this year as inflation fell back towards the Bank’s 2% target following the West’s energy-led price shock.

But financial markets, which had tipped a similar future path up until a few weeks ago, now see only two quarter point reductions priced in due to additional weight on inflation.

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However, the chances of a rate reduction at the Bank’s next meeting in February rose from near 50% to 66%, according to LSEG data after the minutes of the 18 December meeting were published.

Such a move would be broadly welcomed by millions of borrowers also still feeling the pinch from the wider cost of living crisis.

Prices have generally not been falling but rising at a much slower pace. Energy bill hikes for the coming winter are among the current pressures on household spending.

Chancellor Rachel Reeves said: “I know families are still struggling with high costs. We want to put more money in the pockets of working people, but that is only possible if inflation is stable and I fully back the Bank of England to achieve that.

“Improving living standards across the country is our number one focus, and is why I chose to protect working people’s pay slips from tax rises, froze fuel duty and increased the National Living Wage for three million people.”