Retail Sales Fall

It has been announced this morning that UK interest rates have fallen quite significantly coming in at an annual figure of 2.6% compared to last months figure of 3.4%, which as a result saw Sterling fall even further as the recent trend of weaker economic news for the UK and therefore Sterling exchange rates continues. It is possibly not a surprise that retail sales figures are down considering the news we heard recently about the lack of wage growth, it was confirmed by the Bank of England (BoE) last week that wages were not keeping anywhere near in line with inflation levels and as a result the BoE were concerned of the effect this may have on the economy. If people’s earnings are not increasing at the same rate as the prices for goods and services then it will mean people can simply not afford to spend money and their disposable income is heavily reduced. This can have a knock on effect to the UK housing market and also the high street as we have witnessed first hand this morning with the weak retail figures. However, low wages means we are likely to continue to see the rise of discount stores with many of the newer supermarkets that focus on offering cheaper alternatives to the main stores thriving compared to falls in profits for the majority of the main stores.

So, it seems that for the UK to continue its recovery the government will need to focus on ensuring wages start to increase and with the next general election approaching (it is due in 2015) we may start to see economic policies start to be announced. Indeed only this morning the headlines are full of the latest announcement from UKIP and their policy on tax in the UK and as the uncertainty over the future of the UK political scene continues it could have a negative impact on GBP exchange rates.

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