UK retail sales have rebounded back with a vengeance,
surging 1.7% in February, up 3.7% from a year ago. There is good and bad news
in the UK retail sales data. On the positive side, UK consumers are brushing
off the negative effects of recent bad weather and are spending again. Consumer
confidence is on the rise thanks to falling unemployment and the recovery in
the UK housing market. Confidence about the future is rallying. Stronger
consumer demand means that the UK economy is getting onto a sustainable
recovery track. On the negative side, this corroborates the Bank of England’s
view that they need to normalise UK monetary policy as soon as they can
with a rise in interest rates. The policy whispers coming out of the BOE have
been a growing crescendo for higher rates. Carney’s recent suggestion that UK
rates will need to return to 3% is a clarion call for tougher rate action soon.
A UK rate rise by the summer is on the cards. With underlying UK GDP growth
running upwards of 3%, near zero interest rates are a glaring anomaly that
needs rectifying very soon.
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