UK Retail Sales Data Missed Market Expectations, Coming In Hotter Than Expected

Summary:

• U.K Retails data came in hotter than expected.
• Consumer spending has largely decreased in the U.K.

UK Retail Sales Data

UK Retail Sales Data heavily missed market expectations on Friday, with YoY data coming in at -6.9% and market expectations that were originally set at -5.0%, and MoM data also missing market expectations, coming in at -1.4% with expectations originally set at -0.5%. The data from both YoY & MoM missed market expectations by a long way, indicating that the U.K economy had deteriorated throughout September more than the markets had expected.

Retail Sales track changes in the total amount of retail sales that have been adjusted for inflation. It is the most important gauge of consumer spending, which dominates all other forms of economic activity.

The lower than expected readings could be interpreted as bearish or negative, as consumers in the U.K heavily slowdown the spending as the looming recession becomes more real.

Effect on the market

It could be said that the retail sales help investors to gauge the health of an economy and the existence of inflationary pressures. Consumer spending makes up a large part of the U.Ks GDP, the figures that largely missed market expectations could be interpreted as the U.K economy heading into a recession.

The market could expect that the Bank of England (BoE) will continue on their interest rate hiking cycle, and perhaps we could see the BoE turn even more hawkish in their fight against rising inflation.

The initial market reaction for the GBP/USD currency pair saw the GBP weaken against the USD, the same goes for the EUR/GBP currency pair, which saw the EUR strengthen against the GBP initially. The FTSE 100 is up as of the release of the Retail Sales Data.

Sources: finance.yahoo.com, poundsterlinglive.com, ft.com