UK Retail Sales plunge in December

UK Retail Sales fell sharply in December as consumers tightened their pursestrings during what is normally a hugely important time of year for retailers.

Any sense of optimism from the jump in sales in November was short-lived, with the decline in sales last month as widespread as it was steep. Everyone from food retailers to department stores saw a sharp reduction in sales as consumers spent less on gifts and, as it turns out, food during the festive season.

While real household incomes are rising once more, the last two years have clearly taken a significant toll and it would appear many are not yet feeling better off as a result of inflation falling below wage growth.

Some of that may be psychological after two years of seeing bills and prices rising so much compared with incomes but there will also be plenty whose incomes are still being squeezed or who have savings buffers that need rebuilding and debt repaying.

Then there's the evidence we're continuing to see in the aftermath of lockdowns that people are more inclined to spend on experiences than they are goods which has perhaps lasted longer than expected.

Either way, the question that Bank of England policymakers will be asking themselves is what this all means for the economy and the inflationary environment. While problematic for retailers, less demand could help the central bank in its mission to get inflation back to 2% and, as a result, cut interest rates sooner than it would currently admit.

Oil consolidating despite Middle East risks

Oil prices are steady today after another choppy but ultimately consolidatory week. While the price of crude remains sensitive to events in the Middle East, as we've seen over the last couple of weeks, the oil market remains well-balanced which is why we're not seeing prices higher. Supply disruptions remain an upside risk but there are downside risks too including the global economy and OPEC+ unity.

Gold holding above $2,000 for now

Gold is trading a little higher at the end of the week after rebounding off $2,000 a day earlier. The yellow metal has been driven lower by slightly softer expectations for rate cuts this year and a lack of data that could turn things back in its favour. The figures we've seen since the turn of the year have been fine but more than that is needed to maintain the enthusiasm markets ended 2023 with.

How big a post-ETF correction are we looking at?

Bitcoin is continuing to struggle in the aftermath of the spot ETF approvals. While we haven't seen a dramatic decline, the price is still more than 15% off its highs and it broke below $42,000 which appeared to be holding quite well over the last month. The key level now could be $40,000, a break of which would be a big psychological blow and perhaps indicate a more intense post-ETF correction is on the cards.