The rate rise in the U.K is almost a certainty after strong retail sales in August. Markets had increased the probability of a rate increase after recent comments from the Bank of England and the latest retail figures appear to remove any doubt.
Retail sales increased by 1.0% in both terms of value and volume during August. Compared to a year ago, sales were up by 5.6% in nominal terms and 2.4% in real terms. Excluding fuel, retail sales were up 5.8% for the year, or 2.8% in real terms which was about double the expected figure of 1.4%. July’s figures were also revised higher.
Retail figures are notoriously volatile but economists viewed the figures as further confirmation of solid economic growth in the U.K. ANZ senior economist David Plank said, “That [the retail figures] adds some credibility to the BoE’s argument that some modest adjustment…in policy is appropriate. The BoE cut 25bps last year because of concerns about a possible sharp growth slow down. That hasn’t really occurred.”