Timing is everything and can often define success and failure.
Although it was lost in the noise of yesterdays global markdown in asset prices yesterday saw a great set of UK retail sales. The UK high street has been a shocking place to be over the last few years and there have already been a few and near few casualties amongst the familiar faces that make up those high streets. A combination of Online-retailing, greedy landlords charging very high rents and a sluggish economy that was struggling under its own debt pile from years of over exuberance and use of debt financing UK retail has been a poor space to be.
Yesterday saw a glimmer of hope with 2.1% growth in retail sales MoM and 1.9% Yoy. I think it made it a tougher comparison from last year also due to the many festivities that took place with extra bank holidays and jubilees celebrations. Either way its a great print and further signs of some momentum picking up in the UK economy. The government scheme to promote cheap loans to SME’s and help with purchasing housing seems to be feeding through also.
A few months ago you would have struggled to find a trader who didn’t think that Mark Carney would arrive at the BoE and not start increasing QE and further devaluing the pound. Now it appears like Carney is going to receive a really soft landing and inherit an economy that is already on the right trajectory and a lot closer to “escape velocity” than when he officially got the job.
Like to see some momentum during the summer in retail sales, and export figures increasing. Also would be good to see a 20-30 bps move in the unemployment rate to send a signal of hiring activity. But worth keeping an eye on.
Expect a few comments to be made in parliament on this one and also reference to the UK performance vs the French performance. On that theme I would rather be long UK banks over French and certainly long UK gilts over French OATs.