Brexit is taking its toll. The weak pound results in higher inflation and Brits are buying less. Retail sales drop by no less than 1.8%, much worse than 0.2% expected. A small upwards revision for February is worth only 0.3%. Year over year, sales are up 1.7% half the 3.4% rise expected.
Excluding fuel, sales are down 1.5% month over month, a big miss on a 0.4% slide predicted. Year over year, the rise is only 2.6% instead of 3.9% on the cards.This is the largest decline in seven years.
GBP-USD falls under 1.28. The pair shot up on the announcement earlier in the week that Britain would head to the polls. See the five reasons for why the elections are pound-positive.
This is not the first disappointment in retail sales in recent months. Other surveys also showed that UK consumers are concentrating on buying essentials such as food and energy, which have become more expensive. They are shunning non-essentials.
This could weigh on the Q1 GDP growth which is released next week.
Here is how it looks on the pound/dollar chart. Note that cable dropped under the 1.2790 level that was the initial post-Brexit low. Further support awaits at 1.27.
More: GBP/USD: how high can it go? – the pair is currently meeting reality as Brexit bites.
