UK consumers start to slam on the brakes - ING
|James Smith, Economist at ING gives provided his take on today's dismal UK retail sales figures, against the backdrop of recent upsurge in inflationary pressure and slight disappointment on wage growth front.
Key Quotes:
"That’s the message from the latest retail sales data, which excluding fuel, fell by 0.2% in January. This takes the YoY rate to just 2.6%, down from close to 8% in November. This corroborates other survey evidence from the British Retail Consortium, which suggested the high street had a tough time during the January sales."
"To us, this is further evidence that the squeeze on household incomes is starting to weigh on consumer sentiment. Food and fuel prices are soaring, and as the effect of a weaker pound continues to feed through, we expect inflation to break above 3% in the second half of this year."
"At the same time, wage growth is starting to moderate and the employment outlook is, at best, looking subdued. When you put all this together, real incomes look set to start falling and it could be an increasingly tough 2017 for the UK consumer. Recent consumer confidence data has shown that sentiment has been dipping, having rebounded from the immediate post-Brexit decline."
"This is a key reason why we expect the Bank of England to stay on hold through this year and next, despite recent commentary suggesting they have limited tolerance of higher inflation."
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