FXStreet (Delhi) – James Knightley Senior Economist at ING, notes that the UK retail sales bounced sharply in September, boosted by the Rugby World Cup, enhancing the case for higher interest rates.
Key Quotes
“UK retail sales growth in September was surprisingly strong, rising 1.7% MoM excluding fuel and 1.9% MoM including fuel – these are volume-based figures. Food store sales rose 2.3% MoM, which the ONS attribute to the Rugby World Cup – particularly beer sales.”
“Much of these increases reflected strong bounce-backs following a weather-depressed August trading period, but there wasn’t such good news for clothing (-0.9% MoM) and “other stores” (-0.6%).”
“August’s growth was revised down six-tenths, but even so this report was a very positive outcome (consensus was +0.4%). Indeed, YoY growth is now at 6.5% YoY so this bodes well for next week’s 3Q GDP number and provides a strong platform for 4Q growth.”
“With employment and real wage growth rising strongly, the housing market looking strong and consumer confidence at very high levels, there is a growing likelihood that Ian McCafferty will be joined by one, maybe two more MPC members in voting for a rate hike at the 5 November MPC meeting.”
“Moreover, with Mark Carney continuing to hint that he feels it will be a close call for him in terms of whether to vote for a hike around the turn of the year, market pricing of the first rate hike in late 2016/early 2017 seems far too cautious. We continue to look for a 1H16 move. However, we doubt the BoE will want to move ahead of the Federal Reserve given the implications for sterling, exports and manufacturing, even though they have done it in the past.”
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