UK retail sales stood at 1.2% on the month in October from 0% forecast and 1.5% previously, showing the resilience of the UK consumer ahead of the second nationwide lockdown. Cable remains capped below 1.33 on bullish numbers and MUFG Bank economists expect the pound to suffer amid UK financial woes caused by the covid crisis.
“UK retail sales jumped 1.2% MoM in data for October and once again we have evidence of the resilience of consumer spending when an economy faces COVID-related restrictions -19. The economy was not totally stuck in October (which started on November 5), but regionally, the economy was affected, particularly northern England, Scotland and Wales. “
“The resilience of retail sales reflects in part this fact, but also the strength of ‘non-store retail’ which includes online consumer spending. This segment of retail sales jumped 6.4% in October compared to September. But it will be service-related consumption that will be hit in Q4 and we now expect GDP to contract 3.8% Q / Q in Q4 in the UK. If achieved, it would mean an 11.6% contraction of the calendar year. ”
“Rishi Sunak will announce a three-year pay freeze for public sector workers next week. This would come just after the end of a decade of GFC-related austerity and will likely fuel resentment. Healthcare workers should be exempted. Given the bigger hole in UK finances from COVID-19 than elsewhere, the drag on growth going forward is expected to be more severe in the UK than elsewhere, which will also act as a drag on the performance of the GBP in the future.