Proactive Investors - A bleak year ahead may well be in store for consumers after retail sales stagnated in March, XTB analyst Kathleen Brooks has warned.
A flat monthly reading, which came against expectations for a 0.3% increase, is likely to leave the Bank of England cautious on inflation, in turn hitting chances of interest rate cuts.
“UK retail sales volumes are basically unchanged,” Brooks noted following the figures.
“[This] suggests that UK consumers are paying more for fewer goods, which could keep the Bank of England wary about inflation.”
Hopes for interest rate cuts in the coming months had already been dialled down after Wednesday data showed inflation climbed ahead of expected by 3.2% in the year to March.
Markets were left fully pricing in one cut this year, from two previously, with a second reduction now looking more optimistic.
“With fewer rate cuts now priced in from the Bank of England, the prospect of a reprieve for the consumer looks in doubt,” Brooks added.
Jumps in fuel and non-food store sales were offset by reductions in food stores, online and at other non-store retailers, Friday’s data from the Office for National Statistics showed.
Scope Market’s Joshua Mahony added the figures “wrapped up a UK-centric week that saw higher unemployment, elevated wages, and a slower than expected decline in CPI inflation.
He commented: “Today’s retail sales release highlighted a largely underwhelming level of activity from the UK consumer.
“Nonetheless, the lack of spending growth will embolden many who are hoping to see the soft economic conditions continue given the disinflationary effect on prices.”