UK: Retail sales pace to moderate in June with a 0.4% print – TDS

After two months of “1-handles” for UK retail sales, analysts at TD Securities are looking for the pace of growth to moderate in June with a 0.4% m/m gain (mkt 0.2%), and is consistent with Visa spending data released earlier this week, which also supports a slight gain in the month.

Key Quotes

“But risks remain large on either side of our forecast, as reflected in the wide range of forecasts in the Bloomberg poll, from -1.7% to +1.0%. On the downside, we would expect the level of retail sales to eventually normalise after such a big jump over the last two months, and especially after the one-off impact of the royal wedding in May. But on the upside, we saw another month of sunny, hot weather, potentially boosted further by World Cup related activity, which could keep sales elevated for an extra few weeks.”

“So anything from a small negative print to something close to another 1-handle still looks perfectly plausible, but our base case is for a modest 0.4% gain. For the Bank of England, we think that a small m/m decline for June retail sales would still be consistent with a rate hike next month, as that would still leave Q2 consumer spending on a strong footing, in line with the BoE’s view that the weakness in Q1 was just temporary.”

“We think that we’d have to see a pullback in line with the bottom of the Bloomberg forecast range, if not worse, before really rethinking our BoE call.”