UK Retail Sales MM* (Jan) 3.4% vs. Exp. 1.5% (Prev. -3.2%, Rev. -3.3%)

ONS

• "This was the largest monthly rise (sales volume) since April 2021 and returned volumes to November 2023 levels."


• "Sales volumes in all subsectors except clothing stores increased over the month, with food stores such as supermarkets contributing most to the increase."


• "Consumers spent more for less in January 2024, as the 3.9% monthly rise in sales values (the amount spent) exceeded the 3.4% rise in sales volumes."


• Food stores sales volume at 3.4% over the month, recovering from December's record -3.1% print; "Some of the fall in December was because of consumers purchasing Christmas gifts earlier, during the November Black Friday discounts. But 46% of surveyed adults still reported plans to spend less on Christmas shopping because of the rising cost of living..."


• Online sales fell for most subsectors, amount spent online -4.1% M/M but 1.0% Y/Y, increase most likely due to inflation.

via ONS

Reaction details (07:10)

• A much stronger than forecast print which sparked a hawkish reaction, specifically GBP/USD spiked higher from 1.2579 to 1.2604 before paring around half of the move. Bund Mar'24 slipped from 133.31 to 133.20, before extending a handful of ticks lower thereafter.

Market Pricing via Reuters, 07:30GMT

• March 1bp (prev. -1bp)


• May -5bps (prev. -5bps)


• June -14bps (prev. -15bps)


• August -26bps (prev. -29bps)


• September -42bps (prev. -44bps)


• November -55bps (prev. -61bps)


• December -71bps (prev. -73bps)

Analysis details (07:20)

• A particularly strong retail sales print which rounds off a week of key UK data; wages/unemployment, CPI & GDP.


• Overall, the release speaks to the signs of an upturn mentioned by BoE's Bailey before the Q4 GDP print. The metrics have sparked a hawkish reaction in GBP & EGBs (Gilts yet to open) and we will likely see a similar move in market pricing which will further erode the odds of a June cut and could result in August no longer being priced. In short, the Table Mountain approach remains in play as the BoE awaits developments on wage growth and headline/all services CPI.
  


• The retail sales volume metric saw the largest month rise since April 2021 with volumes back at November levels, within this food stores volumes also rebounded to 3.4% M/M in a substantial recovery from December's record -3.1% reading. On the December number, ONS writes that some of the fall was due to earlier Christmas activity during November's Black Friday but that some 46% of adults intended to spend less over the period due to increased cost of living; a finding which can be taken hawkish or dovishly, depending on whether it is viewed from an inflation or growth narrative.

16 Feb 2024 - 07:00- Fixed IncomeData- Source: Reuters