What's going on?

Data out on Friday showed that UK retail sales collapsed in March, with even Brits� little luxuries starting to lose their flavor.

What does this mean?

Brits are known for their stiff upper lip, but even that�s beginning to tremble as they look at painful fuel receipts through misty eyes. That�s put them off making anything but necessary car trips, with sales of gas down 3.8% in March from the month before. Online sales were languishing as shoppers bought fewer nice-to-haves too, falling 7.9% in the biggest monthly drop-off since 2001. And even a 2.6% uptick in household goods sales � itself a sign homeowners are turning to DIY for short-term domestic fixes � wasn�t enough to undo the damage. Overall, retail sales fell 1.4% in March compared to the month before, when optimistic economists were hoping for a drop of just 0.3% (tweet this).

Why should I care?

For markets: The pound falls out of favor.
Things are only going to get worse when energy bills and taxes rise this month, and don�t shoppers know it: data out Friday showed consumer confidence plunged to its lowest since the 2008 financial crisis this month. That has economists forecasting that the Bank of England will be less aggressive with interest rate hikes than previously thought � not good news for the British pound, which gets less appealing to international savers and investors when rates stay low. The data, then, was promptly followed by sterling hitting its lowest point against the US dollar since late 2020.

The bigger picture: The UK economy isn�t spit spot.
You can�t really understate the importance of consumer spending on the UK economy, so this slowdown is bound to take its toll on growth. In fact, economists predicted this week that the country�s economy will shrink by as much as 0.2% this quarter.