UK: Retail sector started the New Year on a stronger footing - ING

According to James Smith, developed markets economist at ING, after a tough Christmas trading period, the UK retail sector started the New Year on a stronger footing as excluding fuel, sales increased by 1.2% in January.

Key Quotes

“Firstly, it’s worth remembering that January is a month where a huge chunk of unwanted Christmas gifts get returned, while consumers also go out and spend their newly acquired gift cards. This impact on post-Christmas revenues isn’t reflected in the retail sales numbers.”

“More importantly, though, Brexit uncertainty is likely to keep a lid on spending over the next few months. Despite an improvement in real wage growth, consumer confidence remains at the lowest level since 2013, led by concerns about both the economic climate and personal finances.”

“There is a risk that, as the Brexit deadline draws nearer, nervousness about the impact of ‘no deal’ will creep into the consumer mindset. At the very least, shoppers may opt against bigger ticket purchases in the short-term, instead choosing to maintain savings levels.”

“Of course, there’s plenty of uncertainty surrounding all of this, but it is another reason why first-quarter economic growth is likely to be capped around 0.2% again.”