Sterling fell to a day low on the news, which followed weak private-sector survey data for the services sector and backed economists’ forecasts of a slowdown in quarterly economic growth when fourth-quarter GDP data is released next week.

“The snowy weather really put a dent in the expected surge in sales,” said Investec economist Philip Shaw.

The Office for National Statistics said that December retail sales were flat on the year after 1.0 percent volume growth in November, the weakest change since January 2010 and the worst annual performance for any December since records began in 1988.

Economists had forecast a 0.9 percent rise on the year.

Sales fell 0.8 percent on the month after a 0.4 percent rise in November, again weaker than economists’ forecast of a 0.3 percent decline.

Strong gains in sales of winter clothing - and of electronic goods after the launch of Microsoft’s Xbox Kinect video gaming accessory — were insufficient to offset other factors, the ONS said.

Economists expect consumers to keep a lid on spending in 2011, as unemployment rises due to job losses from public spending cuts. High inflation and limited wage growth are also likely to focus spending on essentials, they say.

However, it was hard to disentangle the effects of the poor weather from any broader weakening in consumer demand caused by households bracing for a rise in sales tax in January and the impact of the coming public spending cuts.

“December’s figures tell us relatively little about demand.

It will take a couple of months of data to tell us where households are in the early 2011 environment,” Shaw said.

A CBI survey last month had suggested that retail sales were rising at their fastest pace since 2002 in the first part of December, before the worst of the snow. Subsequent surveys and sales figures from individual retailers suggested this was not sustained in the final weeks before Christmas.

Heavy snow made it hard for shoppers to visit out-of-town stores and for online retailers to make deliveries, the ONS said.

Sales at food stores dropped by 3.4 percent compared to December 2009, their biggest annual fall for any month since records began in January 2010.

“This is the 11th consecutive fall in food store sales and lowest on record. One factor to blame was that December 2010 was the coldest December in 100 years. Another factor was a 5 percent rise in prices of goods sold at food stores,” said ONS statistician Kate Davies.

Rises in the cost of food and petrol were the main factors which pushed consumer price inflation up to an 8-month high of 3.7 percent in December, adding to pressure on the Bank of England to raise interest rates later this year.

But the bank is also faced with an economy that is still far from out of growth.

Friday’s data showed fuel sales fell 10.7 percent on the year. Stripping out fuel sales, retail sales volumes fell 0.3 percent on the month — slightly better than the 0.5 percent drop which analysts had forecast.