An unexpected surge in British retail sales data is seen boosting the chance that the Bank of England will raise interest rates in November. Though, as David Pollard reports, not everyone is convinced of the need for tightening.
It's been a hard sell for UK retail. Recent price rises making consumers extra wary. If now, a sudden jump in spending means it could be easier to buy the idea of a Bank of England rate hike - and soon. (SOUNDBITE) (English) PANMURE GORDON CHIEF ECONOMIST, SIMON FRENCH, SAYING: "The two point nine percent CPI inflation that we see in the U.K. is a difficult backdrop for Mark Carney. It will probably in my view now lead him and the rest of the committee to raise interest rates by 25 basis points at the November meeting." A one per cent rise in August sales volumes, 2.4 per cent on the year, appears to defy other recent data. Just as those numbers came out, two surveys showed small business confidence slumping, and employers at their most pessimistic since last year's Brexit vote. With an economy expanding at around half the usual rate, some business leaders even argue the case for a cut. Noting a forty-year low in unemployment as the only standout indicator. (SOUNDBITE) (English) CHIEF INVESTMENT OFFICER, CCLA INVESTMENT MANAGEMENT, JAMES BEVAN, SAYING: "The worrying trend for me is the relatively low level of wage growth relative to retail price index inflation. On that basis, I don't think that we are likely to see any significant positive change in the data for some while yet, meaning that we should expect relatively slow economic growth for the UK for the year ahead." This week also saw the BOE governor warning of the inflationary pressures of Brexit itself. That - after the Bank already surprised markets last week with its more hawkish stance. But - with inflation seen likely to peak soon - there is the worry of what a hike could do to business confidence. And whether it could be just too big a price to pay for Brexit-pinched Britain.