UK Retail Sales Unexpectedly Rose but Fell Over Three Months to January

The UK economy was back in focus this morning. After a quiet Thursday session, UK retail sales figures for January drew investor interest.

UK retail sales rose by 0.5% in January following a 1.2% decline in December. Economists forecast a 0.3% decline. Retail sales avoided a third consecutive monthly decline. Year-over-year, retail sales were down 5.1% versus 5.8% in December.

According to the ONS,

• Sales volumes were 1.4% below pre-pandemic levels.
• In the three months to January 2023, sales volumes fell by 0.9% compared with the previous three months.
• Non-store retailing (primarily online retailers) sales volumes increase by 2.0%, supported by January sales promotions.
• Automotive fuel sales volume increased by 1.7%.
• Non-food store sales volumes rose by 0.6%, while food store sales volumes declined by 0.5%. In December, non-food store sales volumes decreased by 0.7%.

Following a mixed bag of stats from earlier in the week that included a pickup in wage growth but softer inflation numbers, the retail sales figures could set the tone for the March meeting.

Sticky inflation numbers and a pickup in private-sector wage growth will remain a concern for the BoE amidst a weakening macroeconomic environment. Today’s unexpected rise in retail sales may support a more positive outlook. However, the increase may not be enough to push the BoE into a more aggressive interest rate path.

After a busy week on the economic calendar, Monetary Policy Committee member chatter will also need consideration. However, there are no MPC members on the calendar to speak today, leaving investors to monitor commentary with the media.

Ahead of today’s stats, Bank of England Chief Economist Huw Pill intimated that the BoE could slow the pace of rate hikes while needing to remain vigilant on inflation. With Huw Pill seeing signs of a loosening in the labor market, weak consumer spending figures would affirm Huw Pill’s policy outlook.

GBP/USD Response to UK Retail Sales

Ahead of the UK retail sales figures, the GBP/USD rose to an early high of $1.20030 before sliding to a low of 1.19327.

However, in response to the UK retail sales numbers, the GBP/USD fell to a current-day low of $1.19327.

At the time of writing, the GBP/USD was down 0.45% to $1.19393.

Next Up

It is a quiet day on the US economic calendar. There are no material stats from the US to draw interest. The lack of stats will leave the GBP/USD in the hands of FOMC member chatter. FOMC member Michelle Bowman speaks today.

Hawkish Fed chatter from Thursday continued to weigh on the GBP/USD this morning. Bowman could deliver further downside late in the session.