UK shoppers keep foot firmly on the brakes as wage squeeze persists - ING
|According to James Smith, Economist at ING, a drop in retail sales emphasises the fragile nature of UK consumer spending.
Key Quotes
“At -0.8%, the latest month-on-month fall in retail sales suggests that things haven’t got a whole lot better for consumer spending, after what was a particularly woeful second quarter. As the real wage squeeze continues to persist, shoppers appear to be remaining cautious when it comes to non-essentials. Non-food retailers - which includes department stores - saw sales drop by 1.5% in September, whilst internet retailers continue to dominate the high street. Both of these developments back up what we've seen in other data from Visa and the British Retail Consortium.”
“With inflation likely to stay up around 3% for the next few months (albeit set to peak in October) and wage growth set to hover just above 2% in the medium-term, the pressure on household budgets is unlikely to dissipate for at least a couple more quarters. It's also true that much of the spending we've seen throughout the last year has been fuelled by surging borrowing. Whilst much of that is confined to car financing, if consumers start to take a more cautious approach to unsecured lending more generally, that would keep a lid on any recovery in retail spending.”
“Fragile consumer spending is a key reason why we think the Bank of England will take a cautious approach to raising rates. Whilst we expect the Bank to exit "emergency mode" with a November rate rise, we are yet to be fully convinced that the Bank will quickly follow up with a second hike over coming months.”
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