020 7898 0500Flat retail sales sent sterling slightly lower against the US dollar yesterday, but the UK currency managed to end the day higher against the euro following comments from European Central Bank (ECB) President, Mario Draghi.
Flat retail sales will be a big concern to economists as consumer spending accounts for roughly 70% of economic activity. Analysts blamed the warmer weather in September for flat sales, typically a time when consumers start purchasing wintering clothing and taking advantage of the end of season sales. The poor figures could indicate that there could be dark clouds on the way for the UK. Also the well-published demise in sterling confidence is starting to take effect on the consumer as the reality of the Brexit dawns and Olympic euphoria dissipates. The ‘Marmite Wars’ between Unilever and Tesco have highlighted the prospect and the underlying effect of higher inflation on UK products, which in turn have an effect on consumer confidence.
Reflecting on the week as a whole, sterling has managed to hold its ground on the back of a mixed data picture. Inflation rose to 1.0%, which is the highest level since November. This could a sign of things to come and a battle that the Bank of England (BoE) is due to face. However, in a positive for the UK, the unemployment rate held steady at an 11-year low of 4.9 % but wage growth remained weak.
Looking to the day ahead we have the public sector borrowing numbers set for release.
