Thursday, 18th August: British shoppers seem to have brushed aside any Brexit fears according to UK Retail sales figures released by the Office for National Statistics (ONS) today. Retail sales rose 1.4% on the month in July and +5.9% than the previous year. The recent warm weather has been an attribute to the better than expected figures, alongside the weak pound luring overseas investors to buy watches and jewellery. These are the first official figures to reveal how consumer demand has been affected since the decision was made for the UK to leave the EU. The data release moved sterling to a near 2-week high against the US dollar, moving to >$1.317 but GBP/USD is nearly 10% lower since the referendum result. At the time of writing GBP/USD is +0.78% at $1.315.
Other data releases from the week also indicate that there hasn’t been much of an initial impact of the UK leaving the EU, contrary to what people may have expected. On Tuesday inflation figures were released by the ONS which indicated the Consumer Prices Index (CPI) rose to 0.6% in July from 0.5% in June. This increase has been driven by a rise in fuel prices, alongside more expensive alcoholic drinks and hotel rooms. The Retail Prices Index (RPI) rose to 1.9% in July from 1.6% in June. It is this rate that sets the cap for rail fare increases.
On Wednesday labour figures were released in the UK. Between April and June (i.e. figures that are indicative of the run up to the referendum), total UK unemployment dropped by 52,000 to 1.64m. The unemployment rate remained at 4.9%. However, the data also gave the number of people on the claimant count in July (post-Brexit) falling by 8,600 from June to July. Overall, these figures indicate that the jobless total is at its lowest for 8 years whilst the unemployment rate is at its lowest rate since 2005.
Over in the US there seems to be debate amongst Fed members as to whether a rate rise should occur in September. In the minutes from the US central bank’s July 26-27 policy meeting has revealed that members see the US economy as being in a strong position, warranting a rate rise but a slowdown in US jobs figures would forgo a rate rise next month. Members of the FOMC have said they wanted to “leave their policy options open” with some members preferring to wait for evidence that inflation would rise to 2% “on a sustained basis”. There is currently a 18% probability of a rate rise at the next September meeting whilst the probability for a rate rise in December stands at c.43%.
Brent oil has crept back over $50/bbl, its highest level in August and the first time it has breached the $50/bbl mark since the start of July. European indices all closed in the green today with the CAC 40 +0.44%, the German DAX +0.62 and the FTSE 100 +0.14%. The more domestically orientated FTSE 250 closed +0.63%.