UK Retail Sales (AUG)
(MoM) (YoY)
Actual: 0.6% 4.9%
Expected: 0.0% 4.0%
Previous: 0.7% 4.4%
Consumer spending in Europe’s second largest economy was unexpectedly strong over the month of August. Against economists’ expectations for retail sales to pass the month unchanged, market participants actually took in a 0.6 percent increase. The steady monthly pick up helped to push the annual pace of sales up to 4.9 percent, the fastest pace of spending in the sector in five months. The strength in this data was wholly unexpected considering the Bank of England’s efforts this year to tame inflation by raising the overnight lending rate. However, it seems that cyclical low unemployment and rising housing values has faciliated the necessary funding and confidence necessary to keep liberal spending habits alive. This trend will certainly be put to the test for September’s reading though considering the worsening credit problems, financial uncertainty in mortgage lender Northern Rock’s troubles and as always the record credit the consumer sector continues to float. Looking at the National Statistics office’s sales summary, there was a distinct trade off between the broad groups. Household goods stores sold 2.5 percent less in August while non-specialized store receipts dropped 0.6 percent. To counterbalance these declines, food store sales jumped 1.3 percent while Brits purchased 1.6 percent more from textile and clothing shops.
In the first few moments after the sales report hit the wires, the pound was stuttering as the initial print was incorrect. However, when the strong numbers were confirmed, GBPUSD rallied 55 points to overtake 2.0100.