The figure was the worst December figure since 2004 and compares against December 2006 when sales were up 2.5%.
Christmas food and drink sales were slightly stronger than 2006, although year-on-year growth was less than last year and value performance in some grocery categories would have been supported by price increases, the survey found.
The figures come as shares in Sainsbury's and Marks & Spencer tumbled 19.5p and 14.5p yesterday after analysts predicted that Sainsbury's had missed internal sales and profit targets and like-for-like sales at M&S could fall by as much as 2%.
“This result is somewhat worse than we expected and points to a very challenging first half for 2008,” said BRC director-general Kevin Hawkins.
“Given that the full effects of the Bank's previous increases in interest rates have yet to be felt by many households, retailers and manufacturers alike need a rate cut now - preferably a full half-point.”