UK retail sales disappointed in September, falling by 0.4% on the month and missing expectations of a 0.1% decline. That comes after a stronger revision to the August number, which saw a 0.7% increase. Having said that, the quarterly picture is still holding up reasonably well as retail sales volumes rose by 0.7% in Q3 compared with the previous quarter.
Looking at the details, the weakness was fairly broad. Supermarket sales declined after gains in the previous two months, while non-food store sales volumes fell by 0.4%. Clothing retailers also struggled, with the unusually warm September weather weighing on demand for autumn and winter collections.
However, there are also signs that consumers are becoming more cautious with some retailers pointing to lower footfall and customers cutting back on spending.
Coming into the report, markets have been pricing in roughly 98% odds of a November rate hike, with December sitting closer to 45%. The numbers today will not do much to derail expectations for November, especially after the recent inflation figures. But they certainly make the argument for another move in December less straightforward, with the pricing there being more or less a coin flip at this stage.
The BOE has a tough balancing act to manage at the moment. Inflation remains stubborn, while the labour market and now consumer spending are offering less reassurance about the strength of the economy.
So for now, November still looks firmly on the table. But beyond that, the retail sales release today gives policymakers another reason to proceed more cautiously.
This article was written by Justin Low at investinglive.com.
Source: Investing Live - News
