Higher UK inflation starting to bite - ING
|James Smith, Economist at ING, explains that ignoring the fact that UK retail sales growth beat expectations today, the overall picture is still one of slowing growth and they expect no change in Bank rate before the end of 2018.
Key Quotes
“Excluding fuel, sales rose 1.3% MoM, following two months of decline, taking the year-on-year rate to 4.1%. That’s fallen back from the end of 2016, when retail sales growth peaked at 7.7% YoY in October.”
“We interpret this as evidence that the spike in inflation is really starting to bite. Fuel and food prices have soared post-referendum, mainly owing to the fall in the value of the pound. Meanwhile, hiring intentions have fallen in the face of Brexit uncertainty, and that is likely to weigh on the outlook for wage growth. Inflation and wage growth are now running at the same 2.3% rate, and given that we expect CPI to peak above 3% later this year, real incomes are set to fall. We’d expect that to continue to weigh on spending and overall UK economic growth this year.”
“We expect growth risks to increasingly outweigh concerns about above target inflation for the Bank of England. That means that, despite the MPC’s surprisingly hawkish shift last week, we don’t expect a rate hike before the end of 2018.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.