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UK retail sales at risk of a Brexit slowdown

The UK consumer has always been a fickle creature, with the latest January numbers showing a nice rebound in spending in the most recent January numbers of 2.3%, after a disappointing end to 2015 and a decline of 1.4%.

It would be entirely understandable for the February numbers to disappoint given some of the recent weaker than expected economic data that we’ve seen from all sectors of the economy. The recent flooding and bad weather could well also have acted as a slight drag on sentiment.

The recent services PMI data would appear to suggest that some of the recent dynamism in the sector has started to ebb away. All in all that’s not altogether surprising given the gloomy doom laden picture being painted by the “remain” campaign in the event the British people decide to vote against the status quo in June.

While it is entirely understandable that the disadvantages of a possible exit vote are outlined, some of the narrative coming from the “remain” camp has bordered on ludicrous scare mongering. That’s not to say that the “leave” campaign have been any better, they haven’t, but the overall tenor of the campaign is likely to cause the very slowdown that the government should be keen to avoid.

Retail sales on an annual basis are currently at 5.2% and with average earnings still trending above the inflation numbers increases in consumers disposable income continues to move in the right direction.

While the gap between prices and wages has been converging in recent month’s wages continue to rise at a rate of 2% on a quarterly basis, while this week’s inflation numbers look set to show a rise of 0.2% on an annualised basis despite a sharp 0.8% drop in the monthly numbers in January.

Whatever the data shows the prospect of a strong rebound in sterling remains a difficult prospect given the continuing uncertainty surrounding this summer’s referendum. 

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