Sterling jumps on impressive retail sales
19 June 2008
Sterling received a welcome boost on Thursday after a surprisingly strong set of retail sales figures prompted speculation that the outlook for the UK economy may not be as gloomy as first thought. The Office for National Statistics revealed sales rose 3.5% from April to May, the fastest monthly gain since the series began in 1986. Meanwhile, the annual rate of growth rose to 8.1%, the strongest reading since April 2002. The figures reinforced expectations that interest rates are likely to be raised, rather than cut, despite the prospect of a slowing UK economy.
The market was expecting a modest fall -0.1%m/m for an annual gain of 4.2%. The ONS said the sales were driven by food and clothing. Food sales rose 3.3% on the month and textile, clothing and footwear sales leapt 9.2% in May, both the highest since the series began.
However, the official data contradicts other anecdotal evidence issued by the British Retail Consortium and Confederation of Business Industry, suggesting retail sales activity is softening. Indeed, only yesterday the Bank of England published its regional Agents report, which suggested that retail sales growth was at its lowest level in May for two years. Questions are bound to be asked over the validity of the official data and whether or not it reflects a true picture of UK domestic demand.