The pound rose against the dollar on Friday morning after UK retail sales grew 0.4% in March, smashing expectations of a 0.4% decline on a month-on-month basis.
The news will be welcomed, but the uplift could prove to be transitory, with the increased spending likely a result of better weather driving consumers out to the shops rather than any major improvement in underlying economic conditions.
The 0.4% reading also confirms a downtrend in the growth rate after a 0.7% gain in February and 1.3% reading in January.
“Retail sales volumes came in better than expected in March with warmer weather boosting sales for clothing, gardening and DIY goods. Food sales were again weak, however, with sales falling for the second consecutive month,” said Charlie Huggins, Manager of the Quality Shares Portfolio at Wealth Club.
“Although the weather will undoubtedly have helped boost these figures, there is little indication that the UK consumer is significantly cutting back. However, the weak food sales will be a concern to supermarkets.
“The cost of the weekly food shop has risen significantly in recent years, and Trump’s tariffs are unlikely to help. That said, with Asda’s recent commitment to slash prices, perhaps it will be supermarkets’ margins rather than consumers’ pockets that bear the brunt of the pressure this time around.”
GBP/USD rallied around 40 pips in the immediate reaction, before easing back.