UK: Retail sales report was poor – BBH

According to the research team at BBH, UK provided the biggest surprise of the day with a poor retail sales report.  

Key Quotes

“The BRC report had already warned that UK consumers pulled back, but the 1.5% decline in retail sales (excluding petrol) was three times more than expected.  The small upward revision in the February series was not sufficient to ease the shock.   Sales were off broadly, including clothing, footwear, household goods and food.  The quarterly decline was the largest in seven years.  The main culprit appears to be rising prices, but the March decline may have been aggravated by the Easter holiday, which was earlier this month rather than in March as in 2016. UK GDP expanded by 0.7% in Q4 16 and is expected to have slowed to 0.4% in Q1 17.”  

“Sterling was fairly resilient to the retail sales shock.  It eased on the news but remains within yesterday's ranges, which was within Wednesday's range.  After rallying strongly (we suspect mostly on short covering) in response to the surprise call for a snap election, sterling appears to be forming a continuation pattern (flag, pennant, or triangle).  Initial support is seen near $1.2770.  Many have their sights set on the $1.30 area.”