boris johnson economy

About That ‘Boris Bounce’: UK Retail Sales In Worst Run Since 1996

This suggests that not only does the "Boris bounce" lack durability , it may never have existed in the first place.

If you hadn’t yet penciled in a BoE rate cut, you should probably go ahead and get on that.

Friday’s retail sales report was a veritable disaster, as the British apparently decided not to spend during the Christmas shopping season.

The volume of goods sold in stores and online dropped 0.6% last month. The market was looking for a 0.6% rise. Ex-auto fuel, the decline was -0.8%. This includes Black Friday and Cyber Monday.

This data suggests that not only does the “Boris bounce” lack durability , it may never have existed in the first place. Friday’s spending data encompasses the weeks from November 24 to December 28. The election was on December 12. So, nobody was running out to spend all their money on the assumption that with Boris in a position to deliver Brexit, everything was suddenly right in the world.

This comes hot on the heels of this week’s cool inflation numbers that found the headline gauge falling to just 1.3% YoY in December, the most sluggish since November 2016.

Read more: Disastrous Inflation Print Points To Imminent BOE Rate Cut

If you squint, you can see from the visual above that retail sales have been either flat or fallen for five straight months. Hilariously (or not), that is the worst streak since 1996, although it doesn’t really stick out on the series history chart because none of the declines have been particularly grievous.

Circling back, this virtually guarantees a rate cut this month, barring a rebound in PMIs next week.

The pound dove when the numbers crossed Friday. The market is now pricing a January cut at 75%.

“If we defer easing near term and, in the event of persistent economic weakness, face the need for greater easing later on, then risks of a low inflation trap, which would certainly not be a benign outcome, would rise”, Michael Saunders said Wednesday, during a speech in Northern Ireland.

That, after recent dovish comments from Gertjan Vlieghe and Silvana Tenreyro, who expressed some concern about the economy late last week.

(Don’t worry. Boris will fix it.)


 

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