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BREXIT.(“UK retail sales contract by worse than expected to four-year low”)

June 15, 2017

ROYAL

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  1. “UK retail sales contract by worse than expected to four-year low

    by: Mehreen Khan

    Retail sales in the UK economy contracted by more than expected in May, falling back after an Easter-induced jump, in figures that will heighten concerns over a slowdown in consumer spending.

    Official data show monthly sales, excluding fuel, fell 1.6 per cent last month after a 2.2 per cent climb in April. Economists polled by Bloomberg expected a decline of 1 per cent. Sales including fuel dipped 1.2 per cent said the Office for National Statistics.

    On a year on year basis, sales (ex-fuel) grew 0.9 per cent, down from an upwardly revised 4.6 per cent in April – the weakest pace in four years.

    Although the figures are often volatile, they come as British workers are facing the worst squeeze in living standards in over two years.

    Real regular pay growth, which strips out inflation, contracted 0.6 per cent in April – the worst performance since 2014 – as the cost of living has accelerated sharply since the Brexit vote (see chart below).

    Economists have warned the squeeze will intensify in coming months as inflation exceeds 3 per cent and wage pressures remain subdued.

    Inflation has been driven up in Britain following the pound’s steep depreciation after the Brexit vote. The currency hit has raised import costs for businesses which are now being passed on to consumers.

    John Wraith, head of UK rates and economics at UBS, thinks the uncertainty over Britain’s impending EU exit has also led to businesses keeping a lid on pay growth.

    “Wage restraint is a part of increasingly defensive business plans being put in place as the extreme uncertainty of what may happen to businesses and trading relationships after 29th March 2019 [Britain’s EU exit date] intensifies” said Mr Wraith.

    Earlier this morning, furniture store DFS became one of the first UK-focused retailers to warn of lower profits as economic uncertainty has hit consumer demand for high ticket items.

    The company’s shares fell as much 24 per cent this morning, and the warning also dragged down shares in other UK-focused retailers.”)

    https://www.ft.com/content/813da2c1-cec0-3d17-8644-c3dcaddd3f28

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