This morning’s UK retail sales figures showed that consumers started the third quarter of the year on a relatively solid footing, with sales having risen by 0.5% MoM, and by 0.7% MoM when fuel is excluded from the data, implying that the solid economic momentum seen in the first half of 2024 has continued at the start of the third quarter.
Perhaps unsurprisingly, the figures were boosted significantly by a substantial rise in sales in department stores, and in sports equipment retailing, likely a direct consequence of the typical summer discounting, as well as the EURO 2024 tournament, and other seasonal sporting events.
While the release is unlikely to materially alter the BoE’s policy outlook, with the next Bank Rate cut not likely until November, given the gradual approach policymakers favour in terms of normalising policy, amid continued signs of persistent underlying price pressures, the continued direction of travel towards lower interest rates should help to underpin consumer sentiment, and spending, in the quarters ahead.
Downside risks, however, do remain, particularly as the labour market looks set to soften further, and with fiscal policy set to tighten significantly after the end-October Budget.
