British retail sales post surprise jump pf 2.3% in April

Fundamental Analysis

GBP

“Today’s data doesn’t change the underlying story, where the squeeze in household incomes is starting to weigh on consumer activity.”

— James Smith, ING Bank NV

UK retail sales rebounded markedly last month despite the post=Brexit sharp fall in the value of the Pound. The Office for National Statistics reported on Thursday that retail sales surged 2.3% in April, following the preceding month’s upwardly revised fall of 1.4% and topping expectations for a 1.2% increase. The unexpected climb suggested that consumer spending also rebounded in April and would support economic growth in the second quarter. Last month’s gain was mainly driven by the good weather that boosted demand for hardware and household goods. In volume terms, sales advanced 4.0% on an annual basis in April, compared to the prior month’s increase of 2.0%. Meanwhile, market analysts expected sales volumes to rise 2.1% in the reported month. After the release, the Sterling rose above $1.30 for the first time since September 2016 and hit $1.3028 for a short time. Excluding automobiles, sales rose 2% on a monthly basis in April. Despite April’s stronger than expected performance, retail sales are set to drop again in the upcoming months due to surging inflation.

USD

“The details were ... consistent with the recent pickup in manufacturing output in the industrial production report being sustained.”

— Jim O'Sullivan, High Frequency Economics

The number of Americans filing for unemployment benefits dropped unexpectedly last month, official figures revealed on Thursday. The US Department of Labour reported that initial jobless claims fell to 232K in the week ending May 12, following the preceding week’s 236K and posting the third consecutive decline. In the meantime, analysts held expectations for an increase to 240K. Claims remained below the 300K level for 115 straight weeks, the longest stretch since 1973. The number of continuous claims fell 22K to 1.90M during the week ended May 5, the lowest since November 1988. Back in April, US private companies created 211K jobs, roughly meeting analysts’ expectations. Other data released on Thursday showed that manufacturing activity in Philadelphia jumped to 38.8 points in May, up from the preceding month’s 22.0, whereas analysts anticipated a slight decrease to 19.9. More than half of market participants expect the Federal Reserve to raise rates next month. However, uncertainties tied to the US President Donald Trump and Russia may lower significantly the chances of a June rate hike.

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