LONDON: British retail sales unexpectedly surged in August, official figures showed on Wednesday, boosting the chance that the Bank of England will raise interest rates in November.
Last week the BoE said it was likely to raise interest rates in the coming months if the economy and inflation pressures strengthen as expected.
Wednesday’s official data showed a sharp pick-up in monthly sales growth in August to its fastest since April, despite inflation pressures that have previously squeezed spending.
Retail sales volumes rose 1.0 percent month-on-month, beating all economists’ forecasts in a Reuters poll, and July’s sales growth was revised up to 0.6 percent.
Looking at the three months to August as a whole, which smoothes out monthly volatility in the data, sales growth versus the previous three months rose to 1.2 percent from a three-monthly rate of 0.7 percent in July.
However, the ONS said near-record sales growth would be needed in September to stop third-quarter growth showing a slowdown from the three months to June.
BoE policymakers expect moderate third-quarter retail sales growth as consumer demand shows signs of improving after weakness earlier in the year, though they said it was too soon to tell if it would compensate for weak business investment.
Compared with a year earlier, sales in August were up 2.4 percent versus expectations of a 1.1 percent rise.
“Within this month’s retail sales we are seeing strong price increases. … However, we are still seeing underlying growth in sales volumes, and with strong growth in non-essential purchases,” ONS statistician Kate Davies said.
Rising inflation has eaten into British consumers’ disposable income this year, causing the weakest first quarter for retail sales since 2010, as the fall in the pound after last year’s Brexit vote pushed up the cost of the imports.
The measure of inflation used in retail sales data rose to an annual rate of 3.2 percent in August, up from 2.7 percent. Looking just at goods sold in non-food stores, inflation was its highest since March 1992.
Official data last week showed that wages in the three months to July were 0.4 percent lower in real terms than in 2016, and a survey of households by financial data company Markit reported the biggest squeeze in three years in the three months to September.
Private-sector figures had given a mixed message on retail spending in August. The Confederation of British Industry reported the weakest performance since July 2016, while the British Retail Consortium said top-line growth was the fastest so far this year.
The BoE expects inflation to peak at just over 3 percent in October, compared with 2.9 percent now, and then fall slowly.
British fashion retail firm French Connection Group Plc reported on Tuesday that it had seen momentum build in recent months despite difficult trading conditions.
Larger rival Next raised profit forecasts last week and said it expected price rises of no more than 2 percent in the first half of 2018 and none in the second half, if the pound stays stable.
The ONS said non-food retailing and online drove retail sales growth in August, at the expense of purchases of food. Growth was partly driven by sales of watches and jewelry.
UK retail sales surge in August, raises chance of interest rate hike
UK retail sales surge in August, raises chance of interest rate hike
Oil prices rise sharply after attacks in Middle East disrupt global energy supply
- Traders were betting the supply of oil from Iran and elsewhere in the Middle East would slow or grind to a halt.
- Attacks throughout the region have restricted countries’ ability to export oil to the rest of the world
NEW YORK: Oil prices rose sharply Monday as US and Israeli attacks on Iran and retaliatory strikes against Israel and US military installations around the Gulf sent disruptions through the global energy supply chain.
Traders were betting the supply of oil from Iran and elsewhere in the Middle East would slow or grind to a halt. Attacks throughout the region, including on two vessels traveling through the Strait of Hormuz, the narrow mouth of the Arabian Gulf, have restricted countries’ ability to export oil to the rest of the world. Prolonged attacks would likely result in higher prices for crude oil and gasoline, according to energy experts.
West Texas Intermediate, the light, sweet crude oil produced in the United States, was selling for about $72 a barrel early Monday, up around 7.3 percent from its trading price of about $67 on Friday, according to data from CME group.
A barrel of Brent crude, the international standard, was trading at $78.55 per barrel early Monday, according to FactSet, up 7.8 percent from its trading price of $72.87 on Friday, which had been a seven-month high at the time.
Higher global energy prices could lead to consumers paying more for gasoline at the pump and shelling out more for groceries and other goods, at a time when many are already feeling the impacts of elevated inflation.
Roughly 15 million barrels of crude oil per day — about 20 percent of the world’s oil — are shipped through the Strait of Hormuz, making it the world’s most critical oil chokepoint, according to Rystad Energy. Tankers traveling through the strait, which is bordered in the north by Iran, carry oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the UAE and Iran.
Iran had temporarily shut down parts of the strait in mid-February for what it said was a military drill, which led oil prices to jump about 6 percent higher in the days that followed.
Against that backdrop, eight countries that are part of the OPEC+ oil cartel announced they would boost production of crude Sunday. The Organization of Petroleum Exporting Countries, in a meeting planned before the war began, said it would increase production by 206,000 barrels per day in April, which was more than analysts had been expecting. The countries boosting output include Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman.
“Roughly one-fifth of global oil supply passes through the Strait of Hormuz, a vital artery for world trade, meaning markets are more concerned with whether barrels can move than with spare capacity on paper,” said Jorge León, Rystad’s senior vice president and head of geopolitical analysis, in an email. “If flows through the Gulf are constrained, additional production will provide limited immediate relief, making access to export routes far more important than headline output targets.”
Iran exports roughly 1.6 million barrels of oil a day, mostly to China, which may need to look elsewhere for supply if Iran’s exports are disrupted, another factor that could increase energy prices.
