UK: data shows consumers were the key driver of the economy before Brexit - Lloyds

Analysts from Lloyds Bank point out that today’s retail sales report in the United Kingdom for June provides evidence that consumers were the key driver of growth before the referendum.

Key Quotes:

“Retail sales volumes pulled back by 0.9% m/m in June, fully reversing a rise of 0.9% m/m in May, falling short of expectations (LBCB: -0.6%, CON: -0.6%). Nevertheless, the rolling quarterly growth picked up further, from 1.4% last month to 1.6%, leaving the outturn for Q2 above the 1.2% recorded for 2016 Q1.”

“Though the mapping between retail spend and estimates of overall consumer expenditure can be tenuous – even from quarter to quarter – today’s data provide some evidence that consumers were the key driver of growth of the UK economy at least in advance of the EU referendum on the 23rd of June.”

“Nevertheless, the 9% post-referendum depreciation of sterling is likely to push up on import costs over the coming months and, once retail margins can no longer take the strain, on high street prices. In our view, the resulting drag on real household incomes will undermine the ability of households to continue spending as vigorously as they have been in recent months.”