Retail sales suggest UK is weathering Brexit storm well so far - ING

James Knightley, Senior Economist at ING, notes that the strong retail sales and a decent jobs market suggest that the UK’s 3Q GDP number should be robust while the risks remain for the medium to longer term.

Key Quotes

“UK retail sales (ex auto fuel) for August UK are stronger than expected (down 0.3% MoM versus -0.7% consensus) while there were significant upward revisions to July's figure to +2.1% from +1.5%MoM. The report has historically been highly volatile with significant revisions, but this is clearly good news. Clothing sales were down 3.4% after a 6.1% rise last month and household goods fell 5.3% after a 2.7% rise in July. However food sales rose 0.7% while non-specialised sales rose 0.8%.

After yesterday’s decent jobs numbers this report provides further evidence that the UK is weathering the near term effects of the Brexit vote well. A smooth political transition, aggressive BoE stimulus response and the Olympics together with warm weather all appear to have helped. Additionally, sterling's fall is likely to have boosted sales of high end items by foreign tourists as watches and fashions become relatively cheaper for them when bought in the UK versus elsewhere.

Nonetheless, we still worry that the economy will slow given business survey responses point to a sharp deterioration in hiring and investment intentions. We will also have to wait to see whether the end of the summer political recess and the intensification of Brexit debates in the build up to the triggering of Article 50 start to sap confidence more broadly.”