- UK Retail sales unexpectedly fell 0.4% month-on-month in November
- The GfK Consumer Confidence indicator in the United Kingdom rose to -42 in December, still near historic lows
- US market sees losses amid increased recessionary fear and central banks increased expectations for how high interest rates might reach
- Brent crude set to end the week 7% higher
Q3 2022 hedge fund letters, conferences and more
Drop In UK Retail Sales
UK retail sales fell 0.4% in November, against expectations of a 0.3% increase. A large chunk of the drop came from a dip in second hand goods, which had a strong run in October. There are also tough comparisons with October, when there was a big bounce in activity following the additional bank holiday in September.
Non-food stores also posted a decline, as UK consumers tightened their belts while economic conditions soured. There were some areas of optimism though, with food store sales increasing 0.9% as customers stocked up for Christmas. While this is certainly good news, it will be important to assess how that increased spending has been split across the economy.
It’s still likely that some mid-range grocery chains have struggled this year, with discounters likely to be seeing increased activity. Longer Black Friday sales also mean that department stores and household goods also saw a bounce in what is a long-awaited nugget of positive momentum. For all the progress, retail sales are still down 5.9% year-on-year in a stark reminder that economic activity is on the decline.
Rise In GfK Consumer Confidence Indicator
The GfK Consumer confidence indicator in the UK rose slightly to minus 42 in December, which marks a third straight month of improvement. The slight improvement may be a reflection of the more stable political situation, but levels are still near record lows.
There are a few things feeding into this, not least a bleak outlook for personal finances and a lot of unanswered questions about the trajectory of the incoming recession. Of course, real wages are plummeting which is a precarious feeling in the run up to the most expensive time of year.
The US saw sharp sell-offs in the latest trading session, as weak US data including worse-than-expected retail sales and manufacturing numbers, heightened concerns of a recession. At the same time, major central banks including the Federal Reserve and ECB, have increased the overall level that interest rates could reach, although they haven’t signalled that individual rate hikes will be any larger.
The Dow fell to the tune of 2.25%, while the S&P 500 dropped 2.49%. The tech-heavy Nasdaq Composite was down 3.23%. Ultimately, investors will now have a laser-like focus on any comments from the Fed and US PMI reports today.
Despite recessionary fears around demand, Brent crude is hovering around $81 a barrel, as a bright outlook for oil markets outweighs concerns. The International Energy Agency said recently that oil prices could rally next year, which comes as China relaxes its zero-Covid policies.
Exactly what this will mean for demand is hard to predict, with the likely surge in infection rates in the region having the potential to curtal economic activity in the short-term.”
Article by Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown
