U.K. retail sales in good shape

The drivers of U.K. consumer demand have continued to strengthen this year as inflation has fallen to zero and nominal income growth has accelerated. Moreover, consumer confidence remains near record highs, fuelled by a firm labour market. The CBI Distributive Trades survey should corroborate that view. This month's survey is the expanded quarterly version that adds questions on the business situation, employment and prices. 

Logically, such a buoyant environment should be supportive of employment and that is what the official data for Q1 show, states Societe Generale. However, the CBI survey shows highly erratic and inconsistent paths for actual and expected employment. 

"But, expected employment should rise. In the regular monthly section of the survey reported sales should increase from the 21 recorded in July. Likewise, the business situation should remain strong and might even improve on the Q2 reading of 20, the highest since Q3 2014", says Societe Generale.