UK: Retail sales and PMIs point to risks – TD Securities

TD Securities analysts expect United Kingdom (UK) Retail Sales to rise 0.1% month-on-month in March, slightly above market consensus, viewing February’s weakness as payback for January’s strength rather than softer demand. They highlight improving UK PMIs (Purchasing Managers' Index) in both manufacturing and services but warns that accelerating input cost inflation and ongoing geopolitical uncertainty could limit the durability of this momentum.

Retail Sales and PMIs show fragile support

"We look for a modest 0.1% m/m rise (mkt: 0.0%) in retail sales volumes in March. The February dip of -0.4% m/m largely reflected payback from January’s discount‑driven surge rather than a weakening in underlying demand, suggesting some normalisation as promotional distortions fade."

"Online and non‑store retailing should continue to provide mild support, while food and supermarket sales are likely to remain a drag, limiting the upside. Weather‑related headwinds to household goods should also ease, with March bringing in warmer days and less rain."

"The rebound is expected to be tentative rather than strong, consistent with subdued but stabilising consumer momentum in the first month after the Middle East conflict onset."

"UK private sector business activity regained momentum in April, with growth driven by moderate upturns in both manufacturing and services PMIs. Manufacturing rebounded to 53.6 (TDS: 50.5; mkt: 50.3; prior: 51.0) as firms advanced orders and built safety stocks amid rising raw material prices and supply chain concerns, while the services sector move to 52.0 (TDS/mkt: 50.0; prior: 50.5) benefited from technology investments and new marketing initiatives despite lingering weakness."

"Notably, sharply accelerating input cost inflation—especially from raw materials and fuel—persistent global uncertainty, and higher transportation costs, collectively dampened demand and business optimism, suggesting that this uptick is not sustainable should the conflict persist."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)