GBP: UK retail sales suffer biggest monthly decline since financial crisis

The day began with the news that UK car production has fallen as concerns over Brexit escalate. Car manufacturers reported a significant drop, with output shrinking some 4.1% in September alone. In addition, domestic demand fell by 14.2%. Part of the problem is that many car manufacturers rely on their cars crossing over into Europe and back to the UK several times throughout the course of production. The terms of the Brexit bill could put that in jeopardy.

It didn’t get much better after that either, as UK retail sales suffered their biggest monthly drop since the financial crisis. As inflation outpaces wage growth, UK households are feeling the pinch and, naturally, end up spending less than they ordinarily would. The news is particularly disconcerting given the proximity to Christmas – often the busiest time of the year for many UK retailers.

It all provides some food for thought for the Bank of England when they convene next Thursday. It really is anybody’s guess whether they will keep rates on hold or increase them for the first time in a decade. If I were a betting man I would still keep my money in my pocket – it is simply too close to call at the moment.

Sterling slid against the US dollar but managed to make gains against the euro following the ECB announcement. There are no major releases today so sterling movements are likely to be driven by events elsewhere, or continuing fallout from the data releases from yesterday.