"With unemployment on an upward trend, credit conditions tightening and real incomes still being squeezed, the underlying conditions for [UK] consumers are still tough"
- Samuel Tombs, Economist at Capital Economics
Retail sales continued their climb for the second month in a row, reaching +0.9% last month, National Statistics reported on Friday. Analysts had expected a 0.3% drop, so investors were positively surprised after the release of retail sales data [including fuel]. The increase was led by sports equipment and related goods, as the ‘other goods' category skyrocketed by 5.9% last month.
Mervyn King, BoE Governor, claimed that the cooling inflation will continue to curb consumption and ease the situation for customers. Analysts believe that the high-street sales are growing, while the employment is struggling and the loan availability is shrinking.
Economists also suggest the rapid increase was caused by New Year sales and we are likely to see the indicator declining in the months to come.
However, the Britain's economic background is somewhat pessimistic with the economy growing only 0.2% in the last quarter and unemployment staying at the 16-year high 8.4% level. Bearing in mind the European economic turmoil, most retailers describe the outlook as uncertain.
© Dukascopy Bank