UK: CBI retail survey suggests bumper pre-Christmas trading - ING

James Knightley, Senior Economist at ING, suggests that the UK households are clearly willing to spend, but the headwinds for next year are strong.

Key Quotes

“The UK’s Confederation of British Industry has reported that retailers have had a really strong Christmas trading period so far. A net 35% of retailers saw higher volumes of sales than 12 months ago, up from 26% in November and well ahead of the 20% consensus. This is the strongest reading since September last year and suggests that consumer spending will again make a big contribution to 4Q GDP growth. It also again highlights the resilience of the UK economy despite the Brexit uncertainty.”

“However, 2017 is already shaping up to be more challenging. Consumer confidence has weakened significantly in the past couple of months, which may be partly due to growing fears over what Brexit might mean for households, but also an anticipation of sharply higher prices. Inflation expectations have jumped in response to warnings from industry groups and individual companies that the pound’s collapse means higher costs that will likely be passed onto consumers. This is going to squeeze household spending power and may be partly responsible for the recent run of strong spending – people bringing forward purchases to avoid higher prices.”