UK Retail sales disappointing

Tuesday 15th September 2015 11:07 EDT

Retail sales figures in the UK disappointed last week after being hit by the late timing of the bank holiday. Total UK sales were barely changed, up 0.1% compared with the same month last year, while like-for-like sales, which exclude new store space, fell 1.0%.

Manufacturing production fell unexpectedly throughout July as did the UK’s industrial output. Manufacturing production decreased by a seasonally adjusted 0.8% in July. 0.5%.
Retail sales figures in the UK disappointed yesterday after being hit by the late timing of the bank holiday. Total UK sales were barely changed, up 0.1% compared with the same month last year, while like-for-like sales, which exclude new store space, fell 1.0%.
The bank holiday was on 31 August, but both the BRC and the Office for National Statistics judge that the month officially ended on 29 August. It means September's figures will be boosted by back-to-school purchases.

At this time of the year parents are busily shopping for back-to-school essentials like clothes, footwear and stationery and those sales will peak later this year," said BRC director general Helen Dickinson. "Large-ticket item categories like furniture and household appliances also experienced a decline in sales, again likely affected by the bank holiday distortion."
Also on also last week it was announced that German imports and exports had both reached record levels. Boosted by the continuing weakness of the euro, exports rose 2.4% to €103.4bn in July, the federal statistics office estimated, after adjusting for seasonal and calendar effects. Imports also rose, but not by as much, meaning the trade surplus grew to a record €25.0bn.

European statistics agency Eurostat also revised growth in the first quarter, from 0.4% to 0.5%. The upward revision to GDP for the first quarter is a result of the inclusion of Ireland, which had not been counted in earlier estimates. The Irish economy grew 1.4% in the first three months of 2015, compared with the previous quarter, making it the fastest-growing Eurozone country.

The unemployment rate, which is obtained from a separate survey of U.S. households, held steady at 5.3% in July. Average hourly earnings of private-sector workers rose 5 cents, or 0.2%, last month to $24.99. From a year earlier, wages were up 2.1%, in line with the 2.0% pace during the six-year expansion meanwhile, the share of Americans participating in the labour force was unchanged at 62.6% in July. That matches the lowest reading since 1977 suggesting there is still considerable spare capacity in the US labour market.  

GBPEUR ended Friday down on the day following the weak UK CPI data announcement in the morning and a continued short squeeze in the Euro, which is where the larger institutional traders (such as hedge funds, some pension, insurance and mutual funds and large investment banks) took profit on previously held short Euro positions, a process which involved buying Euros.
Following this drop in GBPEUR late afternoon London time, the currency pair has continued to trade in a tight range over the weekend and in Monday’s Asian trading session. GBPEUR is showing signs of rising in early morning trading this morning in the London time zone, following a slightly weaker than expected release of monthly Consumer Producer Price Index (CPI) as of August, which showed that prices fell by 0.1% during the month of August, against the forecast of prices remaining unchanged. Annual Euro Area CPI data remained unchanged from the last release a month earlier at 0.2%. 

The UK consumer inflation expectations came out at 2.0% at 09:30 on Friday morning, both weaker than expectations and the previous release of 2.2% for the previous month, capturing the continued impact of lower oil prices and the slowdown in China. GBPUSD sold off following the data announcement, but recovered before the end of the trading day in London, ending down on the day, but not significantly so. GBP saw some strength in Monday’s Asian trading session and continues to drift higher in early morning London trading against the US Dollar. 

All eyes this week will be firmly placed on the FOMC meeting, which is a 2 day event starting on Wednesday 16th September, ending on Thursday 17th September with the rate announcement at 19:00 London time. The market does not expect a rate hike at this meeting, but is expecting comments to be hawkish in nature, which will could suggest that the Federal Reserve are ready to raise rates before the end of the year. USD could see strength after such an occurrence. 

The New York Fed's survey of consumer expectations, released on Monday, found that median expectations of inflation three years in the future fell to a record low of 2.87 percent from 2.96 percent the previous month.

The one-year expectation was also down, to 2.79 percent from 2.96 percent.
The only other piece of note were further comments surrounding the FOMC meeting. Comments from former fed vice chair Kohn suggested that it would be an error for the fed to lift rates and as such should hold fire. Kohn also added that the Fed should be more focused on outlook than data dependent at this moment. There are rumours that the Fed will carry a very hawkish tone but will not be raising rates in Septembers’ meeting. 

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