UK retail sales slide as shoppers buy less food after summer splurge - business live
|
Version 1 of 14. Today’s report also shows the impact of inflation, particularly at petrol stations where fuel is a lot pricier than a year ago: The sharp drop in retail sales last month shows that consumers are being squeezed, argues Emma-Lou Montgomery, associate director for Personal Investing at Fidelity International. She explains: “Today’s UK retail sales numbers confirm what we all fear about the state of the high street, with the latest figures showing a decline in sales of 0.8% in September compared to August 2018. The drop in sales in September is a reflection not only of clouds starting to form in the sky, but also our pockets. Food stores were the largest fallers contributing to this decline, with sales falling by 0.6%. Uncertainty over Britain’s exit from the EU is one factor, she adds: “While some retailers may be pinning their hopes on the recent news that consumers are likely to see a boost to their pay packets after this week’s data revealed that our earnings growth is currently outstripping inflation, UK consumers are unlikely to be splashing out just yet given the current climate of uncertainty around the Brexit negotiations. Unlike most common colds we are suffering at this time of year; UK households are still unable to shake off the prolonged symptoms of inflation and poor wage growth since the Brexit vote. With no breakthrough at last night’s EU leaders’ meeting, and mounting political pressure at home, that uncertainty hasn’t lifted yet.... Ben Brettell, senior economist at Hargreaves Lansdown, says today’s UK retail sales figures are a concern: Retail sales fell 0.8% in September as shoppers cut back on spending after a bumper summer. Food sales suffered their biggest monthly drop in three years. The monthly data is notoriously volatile, but the year-on-year figure of 3.0% undershot economists’ forecasts of a 3.6% rise, and September’s drop dragged the three-month number down to 1.2%, the third fall in a row. It looks like consumer spending – along with the weather – peaked in early summer and has been declining ever since. Where we go from here is highly uncertain. Brexit is hitting consumer confidence hard, but on the plus side wage growth has hit a decade high while inflation is falling. So consumers look likely to have more spending power – the issue is whether they choose to use it, or keep their powder dry until more clarity over Brexit emerges. Philipp Gutzwiller, head of consumer at Lloyds Bank Commercial Banking, says shoppers cut back last month, after a summer splurge. “After a summer of spending boosted by the long, hot weather, September saw shoppers tighten their belts to catch up. “As a result, retailers have had to redouble their efforts, focusing on either steep discounts or creating the theatre that makes going shopping an experience consumers can actually enjoy. Craig Erlam of trading firm OANDA agrees that the retail sales report is disappointing; #UK retail sales disappoint in September, falling 0.8% month of month, core also, and rising only 3% year on year, 3.2% core, well below expectations. James Hughes of Axitrader says the summer spending burst couldn’t last.... After strong readings during the bumper summer months in the UK Retail Sales it's no surprise that the upside couldn't be sustained. Monthly figure falls to -0.8% with Yearly at 3% vs 3.5% expected. $GBP off slightly, $GBPUSD 1.3108. One month’s data can be volatile, of course. On a three-month basis, the quantity bought in retail sales increased by 1.2% ONS Head of Retail Sales Rhian Murphy said: “Retail continued to grow in the three months to September with jewellery shops and online stores seeing particularly strong sales. This was despite a stark slowdown in food sales in September, following a bumper summer.” Newsflash: UK retail sales shrank by 0.8% in September, a bigger fall than expected. The Office for National Statistics reports that customers bought less food after a strong August. The ONS says: In September 2018, the quantity bought declined by 0.8% when compared with August 2018, due mainly to a large fall of 1.5% in food stores; the largest decline in food store sales since October 2015. Economists had only expected retail sales to dip by 0.4% month-on-month. UK Retail Sales (MoM) (Sep)-0.8% ! ugly On an annual basis, retail sales in September were 3% higher than a year earlier (or 3.2% higher if you strip out petrol sales). More to follow... It was another rough trading session in China today. Nearly every stock fell, as today’s 3% slump means the Shanghai index has lost almost 25% of its value this year alone. Bloomberg says that some speculative traders are being forced to put up more more money to cover their losses. This leads to more selling, and thus more losses, in a destructive cycle also seen in the 1929 crash. Chinese shares extended the world’s deepest slump and the yuan touched its weakest level in almost two years, testing the government’s ability to maintain market calm as risks mount for Asia’s largest economy. Fears of widespread margin calls fuelled a 3 percent tumble in the Shanghai Composite Index, which sank to a nearly four-year low as more than 13 stocks fell for each that rose Shares in Europe have opened a little higher, despite the WTO’s trade war gloom. The FTSE 100 has gained 19 points, or 0.3%, 7,073. France’s CAC and the German DAX are both up around 0.45%. Multinational European companies are benefiting from the stronger dollar (a weaker euro makes their US earnings more valuable). The Chinese yuan is also weakening this morning, hitting its lowest level since January 2017 Yesterday, the US Treasury resisted labelling China a ‘currency manipulator’, in a new report on the foreign exchange policies of major US trading partners. President Donald Trump has previously accused China of keeping its currency weak to make exports more competitive, but the Treasury has now shied away from taking action. Trump’s complaints were ironic, though, that Beijing has actually been intervening to prevent the yuan falling too much. Today, the yuan has dipped to 6.9422. Many other currencies are also dropping against the US dollar this morning, after last night’s hawkish Fed minutes. A weaker currency could help Chinese firms swallow tariffs on their sales to the US..... Chinese yuan very near now to a 10-year low. pic.twitter.com/qcU0dv4ue9 Roberto Azevedo’s warning of the perils of a trade war will have resonated in China’s stock exchanges today. Shares are sliding sharply AGAIN today, as traders fear that the dispute with America will escalate further. The Shanghai composite index has just closed, down 3%, at its lowest level since November 2014. And the Shanghai Composite closes 3% down and below 2,500 for the first time in four years. pic.twitter.com/ynDlogXj8w How bad would a full-blown breakdown of trade relations be? According to WTO chief Roberto Azevedo, “a complete breakdown in international trade cooperation” would drive tariffs higher, knocking up to 17% off global trade growth. That worst-case scenario could knock 1.9% off overall global economic growth, WTO economists reckon. Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. Trade wars are on investors’ minds this morning, after the World Trade Organisation fired a broadside at the US and China over their deepening dispute. Roberto Azevedo, WTO director-general, told an audience in London that we are facing a crisis in global trade. Calling for a cease-fire in the current trade ware, Azevedo warned that: “Without action to ease tensions and recommit to cooperation in trade, we could see serious harm done to the multilateral trading system. The long term economic consequences of this could be severe.” Currently, the US imposes tariffs on $250bn of Chinese imports, as it tries to force Beijing to change its trade policies. Instead, China has retaliated with its own tariffs. Azevedo says a political solution is needed, before “serious harm” is incurred by the multilateral trading system. Potentially, it could force millions of people to seek new jobs, he explained: “These effects would cause significant disruptions for workers, firms, and communities as they adjust to this new reality. “Potentially millions of workers would need to find new jobs; firms would be looking for new products and markets; and communities for new sources of growth. Also coming up New UK retail sales data are expected to show Brits cut back last month. Retail spending is expected to have fallen by 0.4% last month. Jasper Lawler of London Capital Group says: Once again groceries are expected to continue to do well, whilst non-essential items continue to disappoint. After a strong summer of spending from the UK consumer, and a surprise to the upside in August, there is a good chance the UK consumer is reining in their spending ahead of the Christmas period. The City is bracing for further US interest rate rises in future months, after the Federal Reserve signalled it intends to keep hiking - despite Donald Trump’s criticism. The agenda: 9.30am BST: UK retail sales figures for September 1.30pm BST: US weekly initial jobless data |