UK Retail Data Suggests Food Inflation has Peaked, but Spending Squeeze Persists

UK Retail Data Suggests Food Inflation has Peaked, but Spending Squeeze Persists

0727 GMT - In a change of trend, both U.K. food-store values and volumes rose in June, indicating that food inflation appears to have peaked and consumer behavior is starting to stabilize, according to Gizem Gunday, partner at McKinsey & Co., in a note. However, there remain underlying concerns, with nearly a third of U.K. consumers having to dip into savings to cover expenses, while 21% use their credit card more often and 18% have used a buy-now, pay-later option, according to McKinsey research, Gunday says. This could be reflected in the 1% volume increase of nonfood-store sales in June, particularly for department stores and furniture sales, she says. As retailers start to plan for the Christmas quarter, many will need to evaluate product, trend and shopper data to fine-tune retail strategies, she says. ([e-mail])

COMPANIES NEWS:

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Petershill Partners' 2Q Aggregate Assets Under Management Rose

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MARKET TALK:

UK Government Still Constrained Despite Good June Finance Figures

0715 GMT - The U.K.'s public finances in June offer some good news for the beleaguered government but a package of tax cuts this year remains unlikely, says Ruth Gregory, deputy chief U.K. economist at Capital Economics. Borrowing was less than expected in June, thanks in large part to strong tax receipts as wage growth drives consumer spending, income tax, national insurance contributions and VAT receipts, Gregory says. This provides some cheer to the government on the day it lost two by-elections, but with interest rates still rising and a possible recession ahead, Chancellor Jeremy Hunt has recourse to fund tax cuts this autumn, she says. ([e-mail]; @joshualeokirby)

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UK Consumer Outlook Dented by Climbing Interest Rates

0709 GMT - Higher interest rates are likely responsible for sliding consumer confidence in the U.K., economists at UniCredit say in a note. Sentiment slipped more than expected this month, according to a survey by GfK published Friday, with respondents pointing to a worsening economic backdrop ahead. The Bank of England lifted its key interest rate by half a point to 5% in June as it looked to bring down high inflation, a factor likely weighing on consumers' wallets and outlook, UniCredit says.([e-mail]; @joshualeokirby)

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UK Borrowing Figures Unlikely to Tempt Government Into Tax Cuts

0657 GMT - Better-than-expected U.K. public-sector borrowing in June will offer little cheer to the government, Samuel Tombs, chief U.K. economist at Pantheon Macroeconomics, says. Public-sector net borrowing excluding banks stood at GBP18.5 billion in June, below the GBP22 billion forecast by economists in a WSJ poll. But with debt-interest payments running ahead of watchdogs' expectations, there is little scope for the Treasury to cut taxes meaningfully before the next general election, Tombs says. "We doubt that Chancellor [Jeremy] Hunt will risk triggering another rise in gilt yields and jump in mortgage rates by splashing cash before the election," he says. ([e-mail]; @joshualeokirby)

Contact: London NewsPlus, Dow Jones Newswires;

(END) Dow Jones Newswires

07-21-23 0351ET