Consumer spending
After three consecutive months of stronger than expected gains since February this year, U.K. retail sales slowed down towards the end of the second quarter. Retail sales fell by 0.5% in May then printed a mere 0.1% uptick in June, lower than the estimated 0.2% increase.
Despite that, the U.K. still managed to chalk up its strongest quarterly pace of retail sales growth in 10 years, as it reported a 1.6% gain in Q2. Some say that seasonal factors were to blame for the recent dip in spending for the past couple of months while others believe that weak wage growth is starting to weigh on consumers’ buying habits.
Housing
Remember those days when Carney would speak of hiking interest rates sooner rather than later? Back then, increasing house prices and a rising number of mortgages were enough to convince BOE policymakers to consider tightening monetary policy before the end of the year.
Recent reports from the housing sector reflect a slowdown, however, as the Rightmove HPI showed a mere 0.1% uptick in June and a 0.8% decline in July. Although BBA mortgage approvals ticked slightly higher in June, the annualized pace of increase has been slipping since the start of the year. In January, BBA mortgage approvals marked a 57% year-over-year increase before dropping to 24% in April then 14% in June.
Bear in mind though that the U.K. government has taken a few measures to cool housing demand and prevent asset price bubbles. After all, the Mortgage Market Review introduced in April enforced stricter conditions on loan approvals.
Inflation
Latest inflation reports still printed stronger than expected results, with the headline CPI showing a 1.9% gain and core CPI coming in at 2.0%. This marks a huge leap from the 1.5% headline CPI and 1.6% core figure in May.
Components of the report suggest that the price levels may have been boosted by one-off factors, such as the good weather in the past few months which deterred retailers from slashing clothing and footwear prices for end-of-season sales.
Leading inflation indicators, such as producer input and output prices, appear to be hinting that price levels might retreat later on. PPI input levels slipped by 0.8% in June while PPI output levels dropped by 0.2%, suggesting weaker consumer price pressures in the coming months. It doesn’t help that slow wage growth might keep weighing on price levels as well.
Economic Growth
The preliminary GDP release for the second quarter of the year reflected another 0.8% growth figure as expected. This marked the same pace of expansion as in the first quarter. Components of the report indicated that the services sector contributed the most to growth as the industry expanded by 1.0%. Meanwhile, the manufacturing sector marked a mere 0.2% increase in activity while the construction industry showed a 0.8% decline.
While some economists say that this growth reading was enough to put the U.K. economy back above pre-crisis levels, others think that it’s a sign that the economic recovery has already peaked and may be about to slow down later on. BOE officials share this sentiment, as the minutes of the MPC meeting indicated that economic slack might be a drag to growth towards the end of the year.
Recommended Content
Editors’ Picks
EUR/USD holds above 1.0700 ahead of key US data
EUR/USD trades in a tight range above 1.0700 in the early European session on Friday. The US Dollar struggles to gather strength ahead of key PCE Price Index data, the Fed's preferred gauge of inflation, and helps the pair hold its ground.
USD/JPY stays above 156.00 after BoJ Governor Ueda's comments
USD/JPY holds above 156.00 after surging above this level with the initial reaction to the Bank of Japan's decision to leave the policy settings unchanged. BoJ Governor said weak Yen was not impacting prices but added that they will watch FX developments closely.
Gold price oscillates in a range as the focus remains glued to the US PCE Price Index
Gold price struggles to attract any meaningful buyers amid the emergence of fresh USD buying. Bets that the Fed will keep rates higher for longer amid sticky inflation help revive the USD demand.
Sei Price Prediction: SEI is in the zone of interest after a 10% leap
Sei price has been in recovery mode for almost ten days now, following a fall of almost 65% beginning in mid-March. While the SEI bulls continue to show strength, the uptrend could prove premature as massive bearish sentiment hovers above the altcoin’s price.
US core PCE inflation set to signal firm price pressures as markets delay Federal Reserve rate cut bets
The core PCE Price Index, which excludes volatile food and energy prices, is seen as the more influential measure of inflation in terms of Fed positioning. The index is forecast to rise 0.3% on a monthly basis in March, matching February’s increase.