There was further positive news from the UK yesterday following the employment numbers earlier in the week. UK retail sales increased in July by 0.3% against an expectation of 0.2%. This was largely due to the pick-up in food sales which grew by 1.5% and suggests that consumer spending is surprisingly resilient.
However, a closer look at the sector is not as encouraging, as annualised retail sales growth dropped to 1.3% in terms of volume. This was expected as inflation has bitten into consumers’ disposable income. It is likely that this trend will continue as uncertainty over Brexit shows no signs of abating any time soon.
Given the positive data we have seen this week from the UK it is slightly surprising that we haven’t seen sterling strengthen significantly. Earlier in the week, unemployment fell by 57,000 in the three months up to June, which in turn resulted in the lowest rate of unemployment since 1975. The statistics showed that the participation rate of people in work is 75.1% – the highest since 1971. In addition, UK retail sales improved in the previous figures released.
Ultimately, sterling remains under pressure as Brexit trade talks and other related negotiations drag on.