Forex News – UK retail sales rise sharply in December

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UK retail sales rose sharply in December from November, jumping by 0.6 percent in line with expectations, and rebounding from a previous 0.5 percent drop.

The driver behind the boost in sales was heavy pre-Christmas discounting which drew in more shoppers, giving stores their best three months in more than a  year, according to the UK Office for National Statistics which released the report on Friday.

Sterling was little changed after the news.

Comments from analysts:

RBS analyst Richard Barwell said:

“The numbers were a little bit weaker than we were expecting. We had 0.7 percent monthly rise, rather than 0.6 percent. We thought that volumes would be supported by heavy discounting and that is broadly what we are seeing — firms are being squeezed, they are cutting prices.

“The good news is around inflation. We think finally the Bank (of England) is going to be validated on inflation. The meaningful debate is going to be if inflation goes down below 2 percent at the end of the year — if demand is as weak as we expect over the next 6 months, that will accelerate its decline. We think it will be below 2 percent (by year end).

The Bank of England when it sits down next month should be worrying about how far it is going to fall in 2013.”

Societe Generale analyst Brian Hilliard said:

“A little bit disappointing although the figures are close to market expectations. Given that we know there was very heavy and early price discounting, I would have expected more of a response, especially as we’ve seen reasonably strong growth in nominal sales as reported by the BRC.

“We had early warning of that from the CPI numbers where the clothing and footwear component was showing deeper discounting than a year earlier. That’s why I’m disappointed that the sales bounce has not been stronger.”