British retail sales plummet as eurozone growth picks up pace
Sterling fell to a day’s low, yesterday, after the weaker-than-expected figures. Retail sales volumes contracted 1.4% in the first quarter after rising 0.8% in the last three months of 2016, Britain’s Office for National Statistics (ONS) said.
It was the biggest quarterly decline since the first quarter of 2010, and is likely to reinforce the view among many economists that household spending — the main driver of the UK economy — is now slowing sharply.
That may prove a concern for UK prime minister Theresa May, who earlier this week unexpectedly called for an early national election, in an effort to strengthen her mandate for the next two years of negotiating Brexit.
“Families are facing the fastest rise in living costs for over three years and they are reining in their spending rapidly,” said Richard Lim, chief executive of the Retail Economics consultancy.
Retail sales data are not a precise guide to household consumption, but analysts said yesterday’s figures were an unpromising signal for the UK economy, corroborating other surveys that show inflation taking a toll on household finances.
The ONS said falling retail sales were likely to shave around 0.1 percentage points off first quarter economic growth in Britain — the first negative contribution from the sector since the last quarter of 2010.
Meanwhile, the eurozone economy bounded into the second quarter with strong broad-based growth, according to a survey showing businesses increased activity at the fastest rate for six years as new orders stayed robust.
Signs the bloc is on a sustainable growth path, along with inflationary pressures, will be welcomed by the European Central Bank, which has struggled for years to achieve either, despite ultra-loose monetary policy. Consumer confidence is also improving.
IHS Markit’s Flash Composite Purchasing Managers’ Index, seen as a good guide to growth, climbed to 56.7 from March’s 56.4, its highest since April 2011. A reading above 50 indicates growth. Markit said the latest PMI data, if maintained, pointed to second-quarter economic growth of 0.7%, well above the 0.4% predicted in a Reuters poll this week.
Earlier data from Germany showed its private sector grew at a slower pace this month as services shifted into a lower gear but factory activity remained high, suggesting Europe’s biggest economy is carrying its upswing into the second quarter. French activity confounded expectations in April by growing at the fastest pace in nearly six years, showing no signs of cooling ahead of the most uncertain presidential vote in years.
