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British Retail Sales Show Slight Improvement
Fri, Jan 22 2010, 11:02 GMT
by ecPulse.com analysis team
The British economy showed remarkable improvement in the third quarter and is about to continue the progress in the last quarter, after the fiscal and monetary measures adopted by the government and BoE to stall the deterioration resulting from the worst recession since WWII.
However retail sales, unlike other data released recently, slipped in November suddenly to -0.3% from 0.6% in October, which reflects the decline in consumer’s income. In December, retail sales showed slight improvement to 0.3%, taking advantage of the Christmas holidays that boosted retailer’s sales, yet the reading came lower than forecasts of 1.3%.
William Morrison Supermarkets, the fourth largest supermarket in U.K., announced that its revenues rose 6.5% during the six weeks ending January.
Monthly sales at stores dropped 1% in December, while food sales rose 0.3%; according to the statistics office. Annually, the retail sales slumped to 2.1% from the revised 2.7%.
It seems that the high prices reduced consumer’s purchasing power as CPI rose by 1% to 2.9% in December. However, King mentioned that the rate will drop again near 2%.
Although the reading showed improvement, but the incline is considered week as analysts expected retailers to benefit from other factors that should have helped sales to increase more.
The reduction in Value-added tax (VAT) from 17.5% to 15% after Chancellor of the Exchequer, Alistair Darling, should have given a boost to sales.
Moreover, ILO unemployment for the 3 months ending November slipped to 7.8%, the fastest pace since April 2007 from 7.9% in October, where unemployed people dropped 7,000 to 2.46 million. King, however, mentioned that jobless rate is likely to remain high since the economy still needs support to recover.
Meanwhile, companies have started to lower their termination rate on hopes of better sales, after the global recession has bottomed out and demand on goods and services began to rebound again. Thus, households have now money to spend on buying commodities, along with the confidence that surged after the recovery signs that emerged recently.
PMI manufacturing for December jumped to 54.1, the fastest pace for over two years, from 51.8 in November; while PMI services rose for the sixth consecutive month to 56.8 in December from 56.6 in November, adding to signs of improvement.
This week, BoE policy makers voted unanimously for January’s rate decision to keep both interest rate and APF quantity unchanged at 0.5% and 200 billion pounds. Eyes next week will be set on GDP for the fourth quarter, as the economyexpands and is expected to leave the recession in last quarter. The National Institute of Economic and Social Research (NIESR) predicts the British economy to emerge from recession in the fourth quarter by growing 0.2%.