News & analysis

It would seem UK consumers still don’t give a fig about Brexit, and remain more than willing to spend their real wage increases.

  • Retail sales inc. fuel m/m forecast range -0.5% to +0.5% from 20 economists
  • K. July retail sales ex. fuel +0.2% m/m; est. -0.2% m/m
  • Retail sales ex. fuel +2.9% y/y; est. +2.3% y/y
  • Declining sales across a range of categories were offset by a 6.9% m/m rise in non-store sales, probably the result of online promotions

The report bodes well for a likely growth bump in Q3, as there are few signs that consumers are growing anywhere near as wary of no-deal as businesses.

The usual gripes can be made about the figures; home goods were sluggish, July was warm, and promotions were applied.

However, on the whole the report further confirms the idea that strong wage growth is likely to drive consumer spending, supporting the economy as a whole.

The sunny picture of the consumer sector painted by this week’s labour market figures and today’s retail sales report stands in stark contrast to data about businesses.

Business investment has contracted for four of the past five quarters, and forward looking surveys make it clear businesses are very worried about no-deal risk.

In this context, the strong overall macro outlook offered by rising consumer spending should be viewed as conditional on no-deal being avoided as opposed to a reason for believing that the effects of no-deal on the economy will not be as significant as feared by many.

Copyright: Bloomberg Finance LP.

Sterling is trading only slightly higher on the news; the pound is a one issue currency and as good as this week’s data is, markets know that no-deal risk remains a sword of Damocles hanging above the UK economy has a whole.


Author: Ranko Berich, Head of Market Analysis at Monex Europe.