Hard Bargain

Image source: anastasiia agafonova and Runrun2 - shutterstock

What's going on?

Data out on Friday showed that UK retail sales rose by the most in nine months last month, and the countrys retailers didnt even need to go to any effort to make it happen.

What does this mean?

Omicron mightve spooked the UK over Christmas, but its been water off a ducks back since then: Brits have been getting straight back to normal, and spending more on gas to get them from A to B. Theyre still keen on home improvements too, with furniture sales rising by 17% and electrical appliance sales by 16% compared to the month before. All this helped drive retail sales almost 2% higher than in December the most significant monthly uptick since last April, when non-essential stores reopened after the countrys third lockdown. It also means sales were almost 4% higher than they were before the pandemic in February 2020, so take that, Covid.

Why should I care?

Zooming in: Retailers play hard to get.
These strong numbers came despite the fact that retailers whose costs have climbed significantly in the last year or so couldnt offer the same sprawling January discounts they normally do. And not only were shoppers not getting money off, they were actually paying a lot more than at the same time last year: data out last week showed UK consumer prices were 5.5% higher than in January 2021 the biggest jump in 30 years.

The bigger picture: Rate hikes cant stop, wont stop.
The strength of this and recent jobs data might be enough to convince the Bank of England that the British economy can handle its third-straight interest rate hike next month. Thats arguably a good idea, given that inflation is still more than double the central banks 2% target, and upcoming energy price rises could only send it higher. Some investors even think itll raise rates by 0.5% rather than its usual 0.25% for the first time since 1997.

Originally posted as part of the Finimize daily email.

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