BRC Retail Sales Data Helps the Pound Walk into Tuesday with a Spring in its Step

- BRC reports retail sales were up despite poor weather

- Barclays UK Spend Trends show 2.0% growth

- Pound looking supported against Dollar and Euro

Pound Sterling ticked higher against rivals on Tuesday, April 10 with better-than-forecast retail sales data catching market attention; data has confirmed the UK economy might be doing better than many had previously thought.

The BRC Retail Sales Monitor for March showed a 1.4% increase in sales on a year-on-year basis, this better than the previous month's 0.6% growth and, importantly, comes ahead of economist expectations for a reading of -0.1%.

Eater is cited for the growth, but what is of importance from a currency market perspective is that beat on expectations.

Sterling is seen trading higher against the Euro on a day-on-day basis at the time of writing with the GBP/EUR exchange rate quoted at 1.1484. The GBP/USD exchange rate is holding onto the previous day's gains at 1.4131.

"BRC retail sales were OK overnight. Combined with a positive risk-sentiment, this might be slightly Sterling positive in a daily perspective," says Piet Lammens, an analyst with KBC Markets. 

The BRC retail sales monitor can be considered second-tier in nature; i.e. its not a big release that would tend to move the markets, however, this month's release is of particular importance owing to a recent run of poor survey data.

PMIs from the services and construction sectors released at the start of April proved disappointing with much of the blame for the worse-than-forecast data being laid at the door of the inclement weather seen in March. The data suggests a slow start for the economy in 2018.

However, the BRC retail sales numbers suggest consumers might have been a little more active over this period, and the consumer is a key driver of the British economy.

“March paints a volatile picture for sales, which experienced peaks and troughs to deliver some modest growth on last year. The positive distortion from the timing of Easter pushed sales up by over 15 per cent during the holiday week compared with the rest of the month, only just making up for a sub-zero performance at the start of the month," says Helen Dickinson, Chief Executive of the BRC.

Concerning the outlook, Dickinson says, “there is hope that, with the gap between inflation and wage growth finally narrowing, consumers’ purse strings will slacken to some extent. But the grip on spending power will persist over the course of the year.

Barclays have meanwhile released their retail sales survey which shows consumer spending growth fell to +2.0% year-on-year in March 2018.

The Barclaycard data confirms growth despite the UK experiencing what the Met Office have described as the "most significant spell of snow and low temperatures for the UK overall since December 2010".

This is the lowest rate of growth in two years, down from +3.8% in February and well below the three-month average of +3.2%.

There are no economist forecasts provided for the data, but we would imagine the same kind of surprise factor applied to the BRC sales applies - any growth at all comes as a surprise considering the circumstances.

Barclays report the inclement weather caused Instore growth to return to negative territory, falling to -1.9% in March. This is the slowest rate of Instore growth since July 2012. Online growth remained strong at +11.7%, largely in line with the three-month average (+12.0%).

Unsurprisingly perhaps, travel agents were a bright spot this month, with another exceptionally strong month of growth at +12.5% pushing the two-year growth rate to +16.6%.

All eyes now turn to the official UK retail sales data prints for the month of March which are published on Thursday, April 19. The official data are adjusted for shifts in the timing of Easter so that boost seen in the BRC numbers won't be visible.

But, from a currency market perspective, what counts is the beat or miss on economist expectations, and the BRC data suggests the sector could deliver a positive surprise.

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