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Economy in Brief

UK Retail Sales Take a Hit 
by Robert Brusca January 18, 2008

The hit to UK retail sales was severe enough to reverberate in the exchange markets where sterling suffered a set back in trading after the retail figures were made public. The chart tells the story without the benefits of numbers. The pattern clearly shows a loss in headline momentum and a loss in momentum on all major horizons. Real excl auto sales echos that pattern.

In numbers retail sales drop by 0.4% (ex autos) in real terms in December, and that drop is never a good sign. For the full quarter, however, real retail sales ex autos continue to grow at a pace of 1.9%. But the slip in the three month growth rate is a negative indicator for momentum and the period ahead. Food sales were up in December with nonfood spending weak. UK indicators have been touch and go in recent months, This one pushes the BOE closer to being truly concerned about growth and may be enough to get a rate cut from it. But since inflation data are not cooperative and the EMU region is slowing but holding policy pat, it is not yet clear if the UK will follow the US lead to lower rates or to be stoic and stay with continental Europe. The UK economy seems to be on the cusp.

UK Real and Nominal Retail Sales
Nominal Dec-07 Nov-07 Oct-07 3-Mo 6-Mo 12-Mo Year Ago
Total Retail -0.6% 0.4% 0.0% -0.9% 0.5% 1.7% 4.8%
Food Beverages & Tobacco 0.4% 0.5% 0.1% 4.2% 5.4% 3.2% 5.0%
Clothing footwear 0.0% -0.7% -0.9% -6.2% -0.1% -0.5% 8.1%
Retail excl auto -0.4% 0.4% -0.1% -0.6% 2.5% 2.7% 4.9%
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