Market Report - 21/07/2023

June retail sales surprises ; UK Government borrow £18.5bn last month

The Office for National Statistics have announced this morning that retails sales rose more than expected last month, aided by the warm weather causing the hottest June on record and major supermarket promotions also playing their part.

Overall sales volume climbed by 0.7% month on month, beating June’s expectations of a 0.2% gain - whilst May’s figures were revised lower to 0.1 from 0.3%. Food sales played a huge part in June’s growth with a 0.7% increase, bouncing back from a 0.4% drop in May and some major supermarkets outlined that the warm weather and promotions boosted sales for the month. Sales were also positive amongst most retailers, clothes shops and petrol stations. Following the announcement, economists are suggesting that the positive retails sales figures are now pointing towards an economic growth period for Q2.

 In other news, official figures this morning show that the UK Government borrowed £18.5bn in June, which is around $400m less than the amount borrowed in June 2022. The chancellor Jeremy Hunt has stated that is “now more important than ever to maintain discipline with public finances” as it was announced that the government’s debt pile was bigger than the UK’s economic output in June – the first time this has happened for more than 60 years.

 Public sector debt excluding public sector banks was £2,596.2 billion at the end of June 2023, provisionally estimated at around 100.8% of the UK’s annual gross domestic product, continuing at levels last seen in the early 1960s.

 Following this data release - GBP rallied versus most its major peers, gaining some much needed ground after a week of losses. The GBP/EUR rate was quoted 0.2% higher on the day at 1.1590, narrowing the weekly loss to approximately 0.70%, and GBP/USD was trading up 0.2% at 1.2890, with the weekly loss at 1.70%.

The retail sales data release isn’t usually considered top-tier given the market's obsessive focus on the future of UK interest rates which places overwhelming influence on jobs, wage and inflation figures. However, they will offer some insight into the underlying state of the economy and whether consumer-driven inflation can be something the Bank of England should be wary of when formulating upcoming decisions.

The Pound has fallen over the past two days as markets rapidly reduce expectations for a 50 basis point hike at the Bank of England's August 3rd policy decision to around 40% odds, having seen such a move as a sure-fire bet just last week.

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Market Report - 27/07/2023

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Market Report - 20/07/2023