U.K. Retail Sales Increase as Price Cuts Lure Shoppers: Economy
U.K. Retail Sales Rise as Stores Cut Prices
Simon Dawson/Bloomberg
Customers carry Debenhams-branded shopping bags on Oxford Street in London.
Customers carry Debenhams-branded shopping bags on Oxford Street in London. Photographer: Simon Dawson/Bloomberg
Jan. 20 (Bloomberg) -- Matthew Stych, a research director at Planet Retail, discusses the rise in U.K. retail sales for December. He speaks with Mark Barton on Bloomberg Television's "The Pulse." (Source: Bloomberg)
U.K. retail sales rose in December as stores cut prices to lure consumers during the year-end holiday shopping season.
Sales including fuel rose 0.6 percent from November, when they fell a revised 0.5 percent, the Office for National Statistics said today in London. The December increase matched the median forecast of 21 economists in a Bloomberg News survey. From a year earlier, sales were up 2.6 percent.
The gain may not be maintained as U.K. unemployment rises, inflation outpaces wage increases and consumer confidence falls. With global growth cooling and the euro-area crisis damping export demand, concerns are growing that Britain is heading for another recession. A report today indicated Chinese manufacturing shrank for a third month in January.
“Retail-sales growth driven by price cuts can’t continue indefinitely,” said Samuel Tombs, an economist at Capital Economics in London. “The economy will probably head into a recession without the euro-zone crisis getting worse. The problems in Europe add to the headwinds facing the U.K.”
The pound remained lower against the dollar after the report. It traded at $1.5457 as of 11 a.m. in London, down 0.2 percent from yesterday.
Price cuts helped demand for clothes, products such as computers, as well as sales at department stores. The annual price deflator, a measure of price increases, fell to a 16-month low of 2.4 percent. Excluding fuel, retail sales rose 0.6 percent in December from November and increased 1.7 percent from a year earlier.
China Growth
A Chinese purchasing managers’ index signaled manufacturing shrank this month. A preliminary reading of 48.8 for the gauge, released by HSBC Holdings Plc and Markit Economics today, compared with a final 48.7 number for December. A reading below 50 indicates contraction.
Asian stocks rose, with a regional benchmark index heading for its fifth straight weekly advance, as fewer Americans than forecast filed claims for jobless benefits and Spain and France sold bonds at lower yields.
The MSCI Asia Pacific Index (MXAP) rose 1.2 percent today and the Shanghai Composite Index advanced 1 percent. The Stoxx Europe 600 Index slipped 0.5 percent, while London’s FTSE 100 Index was little changed.
Export Prices
Elsewhere in the Asia-Pacific region, a government gauge of Australian export prices dropped 1.5 percent last quarter in an economy driven by shipments of iron ore and coal to emerging markets including China. Import prices rose 2.5 percent from the prior quarter.
In Europe, German producer prices unexpectedly shrank 0.4 percent in December from the previous month. The median estimate of 21 economists in a Bloomberg News survey was growth of 0.1 percent.
In the U.S., sales of existing homes may have gained 5.2 percent to a 4.65 million annual pace in December after a 4 percent increase in November, according to the median forecast of 75 economists surveyed by Bloomberg News.
In Britain, rising joblessness and high inflation are weighing on the outlook for shoppers. The unemployment rate rose to 8.4 percent in the three months through November, the highest since January 1996. An index of consumer sentiment fell to 38 from 40 in November, Nationwide Building Society said yesterday. That’s close to the record-low of 36 reached in October.
Retailers such as Tesco Plc (TSCO) and Marks & Spencer Group Plc have had to reduce prices to lure shoppers in what they say is a “challenging” environment. Tesco, the U.K.’s largest food retailer, cut profit expectations this month after lower than expected sales.
Stimulus Expansion
Bank of England policy maker Ben Broadbent said the central bank will maintain a forecast for flat growth over the fourth and first quarters when it publishes new projections in February, according to a Market News interview published today.
The central bank has forecast a “sharp” easing of inflation to the 2 percent target, which it says will ease the squeeze on consumers this year. Consumer prices rose an annual 4.2 percent in December, the weakest pace in six months.
The bank is in the final month of a 75 billion-pound ($116 billion) round of bond purchases to boost growth, and economists at Citigroup Inc. and Nomura International Plc expect a further expansion of stimulus next month.
“While falling inflation will provide some relief to households in the coming months, we expect private consumption growth to remain modest in the first half of the year,” said Mauro Giorgio Marrano, an economist at Unicredit in Milan. “Low consumer confidence, a deteriorating labor market, ongoing fiscal consolidation and the uncertainty over the economic outlook will continue to weigh on spending.”
To contact the reporters on this story: Jennifer Ryan in London at jryan13@bloomberg.net; Scott Hamilton in London at shamilton8@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
Rate this Page