Rolling coverage of the latest economic and financial news
- Latest: FTSE 100 drops amid selloff
- Bitcoin lowest since August as risky assets slide
- Retail sales slumped 3.7% in December
- Omicron hit visits to shops last month
- Economy may have shrunk in December
- Consumer confidence tumbled in January
- Households fear rising inflation
December’s retail sales ‘shocker’ won’t stop the Bank of England raising interest rates next month, predicts ING’s Developed Markets Economist James Smith.
Smith points out that retail sales were strong in the autumn (probably because some people started their Christmas shopping early).
“The latest UK retail sales figures for December don’t make for pleasant viewing. Sales fell by almost 4% compared to November, even after fuel sales are excluded (which themselves declined due to increased work-from-home).
“But as is often true with the retail data, some perspective is required. Some of this fall is undoubtedly linked to Omicron, given footfall appeared to have been a little lower in the run-up to Christmas. But a lot of this also looks like a pullback after an unusually strong November and Black Friday. Strong October sales also hinted that consumers did more of their Christmas shopping early relative to past years, given news reports of possible shortages, though this is admittedly harder to prove.
All in, these latest figures are unlikely to move the needle much for the Bank of England, which looks poised to hike rates again in February. But prospects for a more gradual consumer story are another reason to suspect subsequent rate rises will be more gradual. We expect two rate hikes this year.”