Forex News – UK shoppers smashed expectations in run-up to Christmas
January 17, 2014 1:03 pm
(click to enlarge)
The release of December retail sales showed that UK consumers ratcheted up their spending in the run-up to Christmas last year. The month-on-month increase was 2.6% compared to a 0.3% increase the previous month and much higher than a 0.4% rise that was expected by economists. The year-on-year increase was 5.3% in real, inflation-adjusted terms, while in October the annual rate of increase was 1.8% – downwardly revised from 2.0% originally reported.
As can be some from the chart above, the annual rate of increase of retail sales (in volume terms) can be volatile (yellow line). To smooth out the percentage changes in order to find out the underlying trend, the sum of the retail sales of the most recent 12 months was compared with the sum of the preceding 12 months (blue line). In December of 2013, retail sales of January-December 2013 were compared with retail sales of January-December 2012.
This rate of change for December 2013 was 1.6%. Although this rate of change may appear small, it was the fastest since August of 2008, when a 1.9% rate of increase was registered. It should also be kept in mind that the rate of change is inflation-adjusted (quantity) and the nominal (value) increase is higher.
The segments of the retail industry that did the best were non-food stores and the non-specialized department stores were an important beneficiary. Online sales also did very well, as they registered a double-digit increase. Smaller stores, i.e. retailers employing less than 100 people, which sell goods other than food did particularly well. Spending on fuel actually fell.
According to a Reuters poll in January of 2014, UK GDP is expected to have grown by 1.8% during 2013 and is forecast to grow by 2.5% in 2014. Better growth but more crucially an unemployment rate that dropped to 7.4% in the three months to October from almost 8% at the beginning of the year, seems to have encouraged households to raise their spending. During Christmas of 2012 (the base period), consumers faced more difficult economic circumstances which caused them to lower their spending. This might have created some pent-up demand which boosted this year’s Christmas spending to much higher-than-expected levels. Issues with seasonal adjustment might also have played some role in delivering this major surprise.
To sum up, following some slightly weaker- or as-expected UK data recently, the retail sales news fired up sterling bulls. The pound jumped 1 entire cent higher against the dollar, as cable reached 1.6440 from 1.6340 prior to the release. Furthermore, it retained these gains in the hours following the release. The UK’s employment report next Wednesday, January 22nd and the Bank of England policy meeting minutes will be the next important news item for UK watchers.
(click to enlarge)
The release of December retail sales showed that UK consumers ratcheted up their spending in the run-up to Christmas last year. The month-on-month increase was 2.6% compared to a 0.3% increase the previous month and much higher than a 0.4% rise that was expected by economists. The year-on-year increase was 5.3% in real, inflation-adjusted terms, while in October the annual rate of increase was 1.8% – downwardly revised from 2.0% originally reported.
As can be some from the chart above, the annual rate of increase of retail sales (in volume terms) can be volatile (yellow line). To smooth out the percentage changes in order to find out the underlying trend, the sum of the retail sales of the most recent 12 months was compared with the sum of the preceding 12 months (blue line). In December of 2013, retail sales of January-December 2013 were compared with retail sales of January-December 2012.
This rate of change for December 2013 was 1.6%. Although this rate of change may appear small, it was the fastest since August of 2008, when a 1.9% rate of increase was registered. It should also be kept in mind that the rate of change is inflation-adjusted (quantity) and the nominal (value) increase is higher.
The segments of the retail industry that did the best were non-food stores and the non-specialized department stores were an important beneficiary. Online sales also did very well, as they registered a double-digit increase. Smaller stores, i.e. retailers employing less than 100 people, which sell goods other than food did particularly well. Spending on fuel actually fell.
According to a Reuters poll in January of 2014, UK GDP is expected to have grown by 1.8% during 2013 and is forecast to grow by 2.5% in 2014. Better growth but more crucially an unemployment rate that dropped to 7.4% in the three months to October from almost 8% at the beginning of the year, seems to have encouraged households to raise their spending. During Christmas of 2012 (the base period), consumers faced more difficult economic circumstances which caused them to lower their spending. This might have created some pent-up demand which boosted this year’s Christmas spending to much higher-than-expected levels. Issues with seasonal adjustment might also have played some role in delivering this major surprise.
To sum up, following some slightly weaker- or as-expected UK data recently, the retail sales news fired up sterling bulls. The pound jumped 1 entire cent higher against the dollar, as cable reached 1.6440 from 1.6340 prior to the release. Furthermore, it retained these gains in the hours following the release. The UK’s employment report next Wednesday, January 22nd and the Bank of England policy meeting minutes will be the next important news item for UK watchers.
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