UK Consumer Spending Up, British Pound Rallies

Retail consumer sales were up by 1.4 percent in February according to ONS data that was released on Thursday. The pound reacted sharply against other currencies with the Pound to dollar exchange trading up 0.4 percent at 1.2527, Pound to Euro 0.5 percent up at 1.1620. Economists expected a rise in the markets of only 0.4 percent, as data for January showed that there was a 1.3 percent contraction.

Markets React

UK Economist at Capital Economics in London, Paul Hollingsworth said that after the release of the data, the market’s reaction saw the pound rebound strongly. The higher inflation has not affected consumer spending. Figures for December and January showed a decline and the February retail sales indicate strong growth with stores of all types showing growth. According to Lloyds Banks analyst at the Commercial Banking division, Robin Wilkin the stronger inflation has seen the GBP trading up and with the release of the retail sales figures expectations are that the GBP/USD could go to highs.
Capital Economics feel that with the retail sales picking up 2.8 percent in February from 1.9 percent seen in January, and the strong rates of sales volumes, it is unlikely that in the second half there will be strong rates of sales volumes. As inflation is running at its fastest rate, last seen in March 2012. Ahead of the release, markets were concerned taking into account the two previous months data with fading consumer confidence and the increase in UK inflation.

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