After weeks of doom and gloom there was some much welcomed good news out of the UK and United States today. Unfortunately the same could not be said for the Euro.
The UK’s retail sales increased 3.4% in May compared with the same time last year. The report by the British Retail Consortium (BRC) and KPMG suggested that the improved weather was the main contributing factor. The figure was far better than the poor performance posted in April, where total sales fell by 1%. Retailers will be hoping that the extended bank holiday for the Queens Jubilee, the Olympics and the upcoming Euro 2012 football tournament will all boost sales further.
Stephen Robertson, director general of the BRC, said that even a temporary boost to sales was welcome during a tough time for traders.
“Much of the month’s positive performance can be attributed to spending in the final week when consumers responded enthusiastically to the sun coming out.Small numbers of customers buying jeans and knitwear in the first weeks of May became many more people purchasing skirts, shorts and swimwear by the end of the month,” he said.
The BRC said that there is continuing caution from consumers and doesn’t expect for there to be significant growth in sales as long as people are worrying about their jobs and bank balances.
“Retailers are hoping that the Jubilee celebrations will have helped to pull out them of the mire, but a short-term patriotic spending spree will not overcome the underlying difficulties facing the industry – which remains under pressure from a combination of declining consumer confidence and squeezed incomes, Those retailers not selling big-ticket home-related items are hoping the sun stays out all summer long,” said Helen Dickinson, head of retail at KPMG.
The figures show that online sales excluding food rose by 12.4% showing mild growth in online sales.
The Bank of England helped boost the pound today after it revealed that it would not be contributing any more monetary easing into the economy. It also left interest rates at the record low level of 0.5%
The CBI business group said the Bank’s latest decision would have been “a tricky one”, given that both official and survey data continued to present “a mixed picture” of the economy.
A recent poll of economists by Reuters had showed that 25% of those asked thought the MPC would vote for more QE.
“It seems that a ‘wait and see’ position has been adopted for the moment,” said Anna Leach, the CBI’s head of economic analysis.
“The ongoing crisis in the euro area will continue to put pressure on fragile business conditions for the foreseeable future. But we still expect the UK economy to improve modestly later in the year, with further falls in inflation providing some support to family incomes.”
Elsewhere in the United States the latest unemployment figures showed a slight improvement. First time benefit claims fell by 12,000 to 377,000 down from an expected figure of 383,000. The better than expected figures are a boost to the country’s labour market.
“It’s pretty clear claims are stabilizing,” said Michael Englund, chief economist at Action Economics LLC, who forecast 375,000 claims. “It’s hard to make the case that there’s any upward tilt to growth,” so companies are being cautious, he said.
The pound and Dollar are expected to continue to strengthen after China cut its interest rates for the first time since 2007, prompting concerns that the country’s economy is seeing a slowdown greater than what has been predicted. The ongoing situation in Spain and Greece continues to weigh down the Euro.
The Pound to Euro exchange rate is currently trading at 1.235
The Pound to US Dollar exchange rate is currently trading at 1.558
The Euro to Australian Dollar exchange rate is currently trading at 1.262
The Euro to US Dollar exchange rate is currently trading at 1.261
The Euro to Pound exchange rate is currently trading at 0.809
The US Dollar to Japanese Yen exchange rate is currently trading at 79.472
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