UK Retail Sales Tumble Unexpectedly to Fuel Recession Fears

It was a busy start to the day on the UK US economic calendar. Following the UK employment and inflation figures on Tuesday and Wednesday, UK retail sales figures for December were in the spotlight.

Retail sales tumbled by 1.0% in December following a 0.5% decline in November, with core retail sales sliding by 1.1%, reversing a 0.3% fall in November. Economists forecast increases of 0.5% and 0.4%, respectively.

According to ONS,

• Non-food store sales slid by 2.1%, with retailers signaling a continued pullback on spending due to increased prices and affordability woes.
• Food store sales declined by 0.3%.
• Royal Mail strikes forced shoppers into stores leading to a fall in the proportion of online sales from 25.9% to 25.4%.
• Retail sales were 1.7% below pre-COVID-19 February levels.

Year-over-year, retail sales declined by 5.8% in December versus 5.7% in November. Economists forecast a fall of 4.1%.

With elevated consumer prices and the Bank of England’s monetary policy goals, today’s stats gave investors a sense of how the UK economy wrapped up the year. Notably, the latest stats will be food for thought for MPC Committee members. Consumers are tightening their purse strings despite the pickup in wage growth.

GBP/USD Price Action

Ahead of today’s retail sales figures, the GBP/USD rose to an early high of $1.23985 before falling to a low of $1.23653.

However, the GBP/USD rose to a post-stat high of $1.23684 before sliding to a low of $1.23544.

At the time of writing, the Pound was down 0.24% to $1.23609.

Next Up

With the pickup in average earnings and a low UK unemployment rate, the fall in consumption will provide little comfort to the Monetary Policy Committee, which remains under pressure to deliver another hawkish interest rate hike in February.

Considering the influence of this week’s UK economic indicators on the MPC’s monetary policy decision, investors need to monitor chatter with the media. No members are due to speak today.

In the US session, housing sector data will be in focus. However, the numbers are unlikely to influence market risk sentiment. Recession jitters and elevated mortgage rates are affecting homeowner plans to buy new homes.

While the stats are unlikely to influence, FOMC member commentary needs consideration. Members Harker and Walker will speak today.