The pace of U.K. retail activity accelerated in March. Today’s release showed that the headline sales volumes rose 1.1 percent sequentially. Excluding the sale of motor fuel, sales volumes rose even more, rising 1.2 percent. These outturns surpassed Bloomberg consensus expectations for a 0.3 percent sequential fall.
Ahead of today’s release, expectations had possibly been influenced by the disappointing readings of retail activity from the BRC and CBI surveys. Furthermore, positive outturns in January and February had likely biased some forecasters towards expecting a little payback in March. As it happens, the solid outturn for March capped a solid quarter for retail, which rose 1.6 percent in the first quarter.
The outlook for retail spending over the months and quarters ahead depends highly on developments in U.K. households’ finances, noted Lloyds Bank in a research report.
“In our view, while CPI inflation is expected to move above 2 percent for the remainder of this year, a number of those areas of the CPI basket that are captured by retail sales are experiencing disinflation (a reduction in the rate of inflation) or deflation (lower prices), which continue to provide significant support to consumers”, said Lloyds Bank.
With price developments for retail items being a supportive factor for retail sales, further support continues to come from the labor market.
“Ongoing signs of resilient UK activity are likely to force the Bank of England to deliver the next quarter-point increase in interest rates much sooner than the first quarter of 2021 currently expected by financial markets”, added Lloyds Bank.
At 13:00 GMT the FxWirePro's Hourly Strength Index of British Pound was neutral at 1.46805 while the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 116.602 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex
