- FTSE 100 seen lower at the open
- UK consumer confidence at all time low - GfK
- UK retail sales rebound in July
“Holding their ground for now” was how Samuel Tombs, chief UK economist at Pantheon Macroeconomics described this morning’s UK retail sales figures, with the resilient showing helped by financial support from the Government.
Prices continued to rise rapidly but households upped their nominal expenditure by just enough to generate a marginal increase in sales volumes, he said.
While non-food store sales fell by 0.7%, reflecting sharp declines in clothing and household goods store sales, non-store sales rebounded by 4.8%, and food sales edged up by 0.1%.
Tombs said he thinks retail sales volumes will continue to hold their ground over the next couple of months, given that households’ incomes were boosted significantly in July by both the increase in the threshold for employees’ NI contributions and by the payment of a £326 cost of living grant.
In addition, wages likely will rise at a similar quarter-on-quarter rate to prices in quarter three, given that electricity and natural gas prices won’t rise until October and motor fuel prices will be lower than in quarter two.
But the real challenge for retailers will come this winter, as the increase in the energy price cap in October looks set to deliver a near-4% hit to real disposable incomes.
Tombs said he remained hopeful that a combination of further fiscal support from the next Prime Minister and a drawdown of savings by mid-to-high income households will suffice to keep households’ expenditure broadly steady in quarter four and quarter one.
But with the government yet to reveal its cards and consumers’ confidence sliding a new record low in August, a consumer-led recession cannot be ruled out, he warned.
7.25am: London seen flat, consumer confidence drops to all time low - GfK
Trading in London is expected to make a subdued start on Friday despite gains in the US, and a rebound in UK retail sales in July, which came in better than expected.
Spread betting companies see the lead index broadly unchanged at the open.
UK retail sales volumes rose by 0.3% in July 2022, better than expectations for a 0.2% decline, although June’s number was revised down to -0.2% from -0.1%, the ONS said.
Sales volumes were 2.3% above their pre-coronavirus (COVID-19) February 2020 levels, but down over the past year, and the ONS said the for three months to July 2022 sales volumes fell 1.2%.
Automotive fuel sales volumes fell by 0.9% in July 2022 on evidence that the heatwave may have reduced travel and non-food stores sales volumes fell by 0.7% over the month because of falls in other non-food stores (negative 1.5%), and clothing stores (negative 1.2%).
Food store sales volumes rose by 0.1% in July 2022; sales volumes were 0.1% below their February 2020 levels.
The proportion of retail sales online rose to 26.3% in July 2022, from 25.3% in June 2022; despite this pick-up, it continues a broad downward trend since its peak in February 2021 (37.5%), but remains above pre-pandemic levels (19.8% in February 2020).
Another survey released today showed UK consumer confidence at all time low.
GfK’s Consumer Confidence Barometer showed a fall in August to -44, the lowest level since records began reflecting “acute concerns” about the soaring cost of living and bleak economic outlook.
The public's forecast for the next 12 months is also gloomy, recording a heavy fall in recent months to a new low of minus 60.
"A sense of exasperation about the UK’s economy is the biggest driver of these findings," said Joe Staton, GfK's client strategy director.
6.55am: FTSE seen slightly higher
FTSE 100 seen opening slightly higher on Friday after gains in the US overnight although a survey showing consumer confidence in the UK at an all time low may hit sentiment.
Spread betting companies are calling the FTSE 100 up by around 4 points.
GfK's Consumer Confidence Barometer, which has run since 1974, said consumer confidence was at an all-time low in light of "acute concerns" about the soaring cost of living and bleak economic outlook.
The group's index decreased by three points in August to minus 44, the lowest level since records began.
All five measures - which include confidence in personal finances, general economic outlook, and savings - were down in comparison to the same time last month.
In the US the Dow closed Thursday up 21 points, less than 0.1%, at 34,001, the Nasdaq added 27 points, 0.2%, to 12,965 and the S&P 500 improved 10 points, 0.2%, to 4,284.
It was a rocky day of trading for the benchmarks, particularly the Dow, which spent the majority of the day underwater. Investors reacted to initial jobless claims, which fell to 250,000 in the week ended August 13, according to the US Department of Labor. Analysts had projected 260,000 claims.
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