Sound bites: UK retail sales upturn suggests higher UK rates as soon as June

The explosion in UK retail sales demand is another piece in the BOE’s jigsaw for higher rates. The boom in Britain’s High Street and the fast inflating housing bubble are a clarion call to Mark Carney to hike rates as soon as possible. Carney is already warning that the BOE’s objective is to get rates back to a minimum of 3% as soon as possible. UK consumers are being handed a free lunch with rates so close to zero. It will not last for much longer. The UK’s present macroeconomic picture is unsustainable. The surge in April UK retail sales underlines that UK consumers have a spend, spend, spend attitude that will end in tears fairly soon – higher inflation and higher rates. The odds are that the BOE has passed tipping point and that UK rates could go up as soon as the June MPC meeting. The markets and sterling are underestimating the logic that UK rates are set to surge very quickly over the next year. 

RETAIL SALES VOLUME     APRIL   MARCH          FORECAST
 Monthly s/adj change     1.3     0.5    (0.1)    0.5
 Year-on-year change      6.9     4.8    (4.2)    5.2
 3mth/3mth                1.8     0.9    (0.8)
 Sales excl. fuel mm      1.8     0.1   (-0.4)    0.5
 Sales excl. fuel yy      7.7     4.9    (4.2)    5.3