There’s both good news and bad news for the British economy today. On the one hand the nation’s manufacturing output grew better than expected on the other retail sales slumped as consumers stayed in doors to watch the Olympic Games.
The British Retail Consortium (BRC) said that retail sales fell by 0.4% in August compared to the same time last year. The Consortium blames the popularity of the Olympics as one of the key reasons for the slump as many people were stuck to their armchairs fixated on the sporting spectacle unravelling before them. According to data, August was the weakest month for retail sales since Easter with shops in London seeing a sharp decline in visitors during the games.
“There’s no evidence here of any Olympic boost to retail sales overall,” said BRC director general Stephen Robertson. ‘Hot weather and the Olympics did help sales of party food and drink but that was more than offset by a really weak performance for non-food goods.”
The expansion of online retailers has been blamed for the rise in less high street shops. Online retailers posted growth of 4.8% in August their lowest increase since October 2008. Separate figures, compiled by the Local Data Company (LDC), suggested the proportion of shops lying empty increased in every region in Britain bar London between January and June. An average of 14.6% of shops now remains empty across Britain, according to the LDC.
The UK’s latest purchasing managers index (PMI) smashed economists’ forecasts coming in at 49.5% for August, a far better figure than the predicted 46.0%. The figure means that the UK’s manufacturing output is now just under the 50 level. Any figure over this number shows growth.
Rob Dobson, a senior economist at Markit, the consultancy that produces the UK PMI data, warned; “Having followed such marked declines in July, the August readings for production and new orders do little to change the underlying picture of a fragile sector facing enormous headwinds.”
As a result of the PMI data the Pound has risen against a basket of currencies and dampened expectations of the Bank of England implementing further monetary easing measures.
“This suggests maybe the UK is breaking away a bit from Germany and the rest of the euro zone, whose PMI numbers were very weak, and sterling has really reflected that,” said Kathleen Brooks, FX trader.
“If the services PMI gets above 53.3 the high from May it could send us flying above $1.5912 and open the door to $1.60.”
Services make up the bulk of UK gross domestic product and the PMI survey for the sector is forecast to show a rise to 51.1. The service PMI is due for release on Wednesday. A strong figure from that survey will be a good indicator as to whether the UK is set to make a robust recovery in the next quarter and would further limit the chances that the Bank of England taking further action.
The Pound to Euro exchange rate is currently trading at 1.200
The Pound to US Dollar exchange rate is currently trading at 1.588
The Pound to Australian Dollar exchange rate is currently trading at 1.548
The Euro to US Dollar exchange rate is currently trading at 1.260
The Euro to Pound exchange rate is currently trading at 0.793
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