Ample UK household savings brighten consumer spending outlook - Investec
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AMPLE UK HOUSEHOLD SAVINGS BRIGHTEN CONSUMER SPENDING OUTLOOK - INVESTEC
The latest British retail sales figures show UK shoppers "shrugging off" warnings of a painful budget ahead, according to Investec economists, who are optimistic on the consumer spending outlook citing ample UK household savings.
Official data published Friday showed UK retail sales surprised to the upside in September, with sales volumes up by 0.3% in September, beating economists' expectations for a monthly 0.3% drop.
The numbers offer reassurance that UK consumers are not too worried about the upcoming UK budget due to be revealed on October 30, even though it could include tax rises and spending cuts to a value of around 40 billion pounds ($52 billion).
Digging deeper, Investec says spending strength was not equal across the board. There were outsized increases in department store and in ‘other non-food stores’, while food store sales were relatively weak.
"These details aside, the wider trend in spending volumes is pointing upwards: the level of monthly sales volumes in September was the highest since July 2022," they add, saying falling inflation was key.
But there are headwinds. The downward trend in price inflation does not look like it has much more steam, say the Investec team, while wage growth also seems to be on a downward trajectory.
Despite all that, they remain optimistic about consumer spending prospects.
"That is because households have, for the time being, ample savings. Indeed, the latest household saving rate is, at 10%, historically high," they write, leaving room for spending growth to exceed real income growth.
"Sentiment and optimism about the future will be key to this," they say.
Whether this optimism persists post-budget? Still TBC.
(Lucy Raitano)
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