UK Retail Springs Back

What's going on here?

According to data released on Thursday, Brits returned to the shops with a vengeance in April – and the good news for the economy helped pushed the pound to its highest level (versus the US dollar) in almost nine months!

What does this mean?

Retail sales in the UK increased 2.3% in April versus the month prior – a much stronger reading than economists were expecting. The warm April weather was given some of the credit, as Brits apparently rushed to buy spring clothing and kit out their gardens. The later-than-usual Easter also helped, which brought people into stores just as the weather was improving for the long weekend (yes, weather can apparently have that big of an effect on the economy).


Following a drop in retail sales last quarter (their first quarterly decline in almost four years!), the good news on Thursday was a welcome sigh of relief for UK retailers.

Why should I care?

The bigger picture: Consumer spending in the UK clearly hasn’t collapsed!

Most economists argue Thursday’s news is an exception to a general decline in consumer spending (and thus retail sales) taking hold across the UK. However, the British economy is still proving much more resilient in the wake of the Brexit vote than most economists thought it would. While consumer spending, which makes up about two-thirds of Britain’s economy, has almost certainly weakened, Thursday’s retail sales data is a reminder that it’s not collapsing.

For markets: The pound is going up in value!

The pound sold off sharply in the aftermath of the Brexit vote largely because investors thought the UK economy would seriously suffer in the years ahead. As Thursday’s data suggests, that hasn’t happened (at least not yet). The pound has gradually increased in value versus the US dollar since January, which partly reflects investors’ more optimistic view of the UK’s post-Brexit economy (remember, the value of a country’s currency is typically tied to the strength of its economy).