UK Retail Sales Surge Boosts BoE Rate Hike Chances

British retail sales unexpectedly surged in August, official figures showed on Wednesday, boosting the chance that the Bank of England will raise interest rates in November.

Last week the BOE said it was likely to raise interest rates in the coming months if the economy and inflation pressures strengthen as expected. Wednesday’s official data showed a sharp pick-up in monthly sales growth in August to its fastest since April, despite inflation pressures that have previously squeezed spending.

Retail sales volumes rose 1.0 percent month-on-month, beating all economists’ forecasts in a Reuters poll, and July’s sales growth was revised up to 0.6 percent.



Looking at the three months to August as a whole, which smooths out monthly volatility in the data, sales growth versus the previous three months rose to 1.2 percent from a three-monthly rate of 0.7 percent in July.

However, the ONS said near-record sales growth would be needed in September to stop third-quarter growth showing a slowdown from the three months to June.

BOE policymakers expect moderate third-quarter retail sales growth as consumer demand shows signs of improving after weakness earlier in the year, though they said it was too soon to tell if it would compensate for weak business investment.

Compared with a year earlier, sales in August were up 2.4 percent versus expectations of a 1.1 percent rise.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza