The fundamental drivers of UK consumer spending remain less than helpful as evidenced by this week’s wage, unemployment and confidence data. Yet recent retail sales volumes have been supported by discounting by retailers. December’s figures look to have been further boosted by two other factors. First, a national strike day, in the public sector, allowed some people to head to shopping centres, while Christmas day falling on a Sunday provided an extra Saturday’s shopping the day before. The BRC survey recorded a sharp jump in total sales - although the true underlying rise was obscured by last December’s snow. As such, a lot of uncertainty surrounds this month’s release. We look for a punchy 0.9% rise in volumes, with the annual rate up to 2.7% - the second highest level since 2008. But this is likely to prove a short-term boost, with the longer-term outlook remaining troubled.
Recent US economic data has generally pointed to an upswing in activity but yesterday saw weaker than expected December housing starts. Nevertheless there have been some encouraging signs in the US housing sector of late. For example, this week the NAHB housing market index rose for the fourth straight month in January to its highest level since June 2007. Existing home sales figures out today should show that this improvement in confidence is translating into a rise in market activity. As of November sales were up over 10% from their summer lows and we expect that another solid rise took place in December. Although of course this would still leave sales nearly 40% below their 2005 cyclical peak
Devember UK retail sales supported by further discounting
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