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U.K. retail sales rebounds sharply in April, consumer sector outlook appears constructive

The U.K. retail sales pace picked up strongly in April after March’s weather-impacted fall. The rebound eases worries over the health of U.K. consumer. Over the month, underlying retail sales rose 1.3 percent, coming above consensus expectations of a rise of 0.5 percent. In the meantime, headline sales recorded an even stronger rise of 1.6 percent sequentially, underpinned by a 4.7 percent monthly rise in fuel sales.

The arguments for a strong rebound in retail sales was compelling last month. The noticeable turnaround in the weather along with the continued feed-through from improved household real incomes underpinned a huge increase in retail sales activity. The effect of the former was clear in sales at clothing and footwear stores and food stores, while the overall rebound in purchasing power was seen in rises in all but one of the main categories of retail spending.

The consumer sector’s outlook appears relative constructive, noted Lloyds Bank in a research report. As seen by the inflation figures so far in 2018, the headline CPI has eased from its peak and notwithstanding a sticky patch over the next few months, is likely to drift lower into year-end. Meanwhile, there is growing evidence that the tightness of the U.K. labor market is resulting in some rise in wage inflation, which is expected to continue, stated Lloyds Bank. These influences are expected to alleviate some of the pressure on households’ balance sheets, giving a supportive backdrop for consumer spending.

“Following, the sharp slowdown in Q1, today’s report should provide some comfort over the UK’s near-term growth outlook and support the prospect of an acceleration in GDP in Q2”, added Lloyds Bank.

At 12:00 GMT the FxWirePro's Hourly Strength Index of British Pound was neutral at -41.3304, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 38.3452. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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