Sterling boosted by rebound in retail sales
21 February 2008
Sterling jumped half a cent against the US Dollar as British retail sales surprised the market on the upside this morning, recording its highest monthly headline rate since February 2007. Sales grew by 0.8%m/m in January, four times the predicted level of growth, bringing the year-on-year rate up to 5.6%.
The retail figures were lifted by heavy discounting in the January sales, as price conscious shoppers took advantage of cut price goods. The rise was largely driven by a 0.7% monthly jump in food sales, while household goods leapt 4.3% on the month. The Office of National Statistics said the discounting of electrical goods particularly stood out. While base effects drove the annual rate of growth to 5.6%, the 3-month growth rate was broadly unchanged at 0.6%q/q from 0.5%q/q in the 3-months to December.
The Bank of England has cut interest rates by 0.5% since December, in order to prevent an economic slowdown. The latest retail figures provide some relief for the Central Bank and continue to suggest only a gradual easing of interest rates in the months ahead.