Author Ben Leonard
After an 8 month low, the Pound has finally broken the $1.30 barrier after the UK retail sales figures were announced.
Retail sales boost pound
It was announced by the Office of National Statistics (ONS) that the retail sales volumes in the UK had actually risen 2.3% for the month of April, beating economists’ forecast of a 1% rise. This comes after a sharp drop in the previous month, with retail sales falling 1.4%. March was the weakest calendar quarter since 2010, according to the ONS.
If fuel is excluded, retail sales in the UK rose by 2.8%, up from 1.7% last month. This had a knock-on effect of causing the Pound to rise 0.7% against the dollar, to $1.3607. The Pound also rose
against the Euro, to €1.1307.
Economists are encouraged by these figures, which come amid warning signs that the UK economy is going into free fall as a result of Brexit and other issues. We’ve previously seen that living standards are being hit by a mixture of inflation and stagnant wages.
Massive hikes in inflation
This is further compounded by the fact that the price for non-food items is actually at its highest point for 25 years.
However, the increase in retail sales actually came from non-essential items. Petrol sales fell and food shopping has remained flat, showing that the increase in sales is from non-essential items.
This rise in non-essential items comes despite a rise in prices compared to last year. The average store price is actually 3.2% higher than a year ago. Clothing and petrol have been the hardest hit by this increase in price.
The ONS found that inflation has hit its joint-highest level for 5 years in August, driven in part by this increase in the price of clothes – the largest on record.
Kate Davies, a senior statistician at the Office for National Statistics, said: “We are seeing strong price increases across all store types compared with a year ago, reflecting wider inflationary pressures.”
Ruth Gregory, a UK economist at Capital Economics, said that the figures released by the ONS showed that British consumers were “showing an impressive resilience in the face of the ongoing real pay squeeze.”
A real pay squeeze
Ms Gregory also added that, while high-street spending growth has “been on a clear downward trend”, she expected a small increase in consumer spending in the third quarter of the year.
“Not only did retail sales volumes rise by a hefty 1pc on the month in August – exceeding consensus expectations of a 0.2pc rise – but growth in the previous month was revised up from 0.3pc to 0.6pc too. Admittedly, we shouldn’t get too carried away by these figures. After all, the retail sales figures are very volatile on a month-by-month basis,”
But the survey highlighted longer-term uncertainty about the UK’s future trading relationship with the EU. Investment intentions weakened in the services sector and there were some reports of larger companies favouring direct investment overseas instead of investing in the UK.