Retail Sales Decline In UK Taking Down Sterling With It

Retail sales in the U.K. saw their largest decline in greater than four years this past December, hurting what was expected to be a good fourth quarter.

According to a report by Reuters, the slump in retail sales during the month of December also hurt the sterling as expectations are rising that inflation will increase since the U.K.’s historic vote to exit the European Union. Reuters noted consumer spending had been the driving force in the U.K. economy since Brexit given investment and trade — sources of growth — have been slumping.

Late last week, data came out that showed retailer sales volume declined 1.9 percent in December compared to November, much lower than the 0.1 percent decline economists in the U.K. were expecting. This resulted in the sterling falling close to half a cent to under $1.23.

“December’s data delivered some unpleasant omens for this year,” said Martin Beck, senior economic adviser to consultancy EY ITEM Club, in the Reuters report. “The squeeze on households’ real incomes is gradually tightening, implying a tough 2017 for retailers.” The economic adviser said shop price inflation reached a three-year high of 0.9 percent, while annual sales growth volume fell to a three-month low of 4.3 percent. In November, it was 5.7 percent.

Reuters noted that a poll of economists published last week shows the economy in the U.K. is forecast to grow around 1.2 percent in 2017, which is close to half the rate of last year. Reuters noted a recession in the U.K. isn’t expected. The retail sales results for December contrast with what retailers reported in terms of financials thanks to a strong Christmas season.


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