UK Retail Sales Disappoint As Consumers Turn Wary; GBP/USD Relatively Steady
Retail sales in the UK in July expanded by 0.2% from the month prior missing expectations of a 0.3% expansion; the miss was mitigated somewhat by the upward revision to June’s numbers from 0.7% to 0.8%. The upward revision, however, comes in stark contrast to the recent weakening trend reaffirmed by July’s numbers with the annual reading showing a flat reading amid forecasts of a 0.3% expansion.
We suggested in the past that the June numbers had been due to various one-off supportive factors that where at play and contend that now that those factors have evaporated the July reading has reverted to its longer-term downward trend. The consumer psyche in the UK has been hit hard recently with dwindling real purchasing power, elevated CPI and energy prices as well as job uncertainty and general growth concerns. All these factors have led UK consumers to save a far higher portion of their incomes and keep their wallets tightly shut when it comes to discretionary spending. As holiday and back-to-school spending winds down in the next few weeks the outlook until the Christmas shopping season is relatively gloomy for retail sales. We expect things to pick up considerably however into 2012 ahead of the Olympics which are being held in London.
Sterling was whipped around a tad in the lead up to and immediately after the release but looks to be settling down back around its pre-release levels, holding above the 1.6500 level. We suggested yesterday that despite the UK’s rather bleak growth prospects some investors still view the island nation as better off than the US or EMU, these trends are helping to support the pound. For a full technical outlook click here.
Written by Jonathan Granby, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.