Retail Sales Surprise. Consumer Confidence Demise.

Good Morning,

Here are this morning's headlines:

Retail Sales Surprise. Consumer Confidence Demise - Retail sales have taken an unexpected rise in April which saw a m-o-m rise of 1.4% in April, well above the market expectations of a 0.2% fall. These strong figures have softened the blow seen over the last two months print which saw a fall of -1.2% and -0.3% and have mostly been accredited to increasing sales at non-store retailers (up 3.7%) and petrol and diesel (up 1.4%). Household goods stores (accounting for places such as furniture stores) saw a fall of ? a percent as consumers appear to be holding back on major purchases.

This comes as consumer confidence hits its lowest level since 1974 as households consider the implications of falling real wages and a looming recession. This means that consumers are more pessimistic about the economy and their own personal financial situation than at any point during the 2008 crash and subsequent Great Recession with the index falling to -40pts (below expectations of -40pts). Features of the UK’s economic common parlance which have gained increasing traction over the last few weeks have no doubt fed into this, with phrases including ‘cost-of-living crisis’, ‘stagflation’ and prospects of ‘double-digit inflation’ making headlines.

Breaking down consumer confidence by age categories also suggests that young people’s lack of confidence is most prevalent relative to other age groups. This comes as young-people’s ability to get onto the housing ladder has been squeezed with real wages falling and interest rates and house prices rising. Indeed, only recently we learnt that the average house price hit ￡286,079?after?ten?consecutive monthly rises?– representing the longest run of price increases in six years.?

Australian Election- This weekend will see the Australian electorate go to the polls where labour’s Anthony Albanese will seek to defeat Scott Morrison and nine years of conservative rule. Currently, the incumbent Liberal-National coalition holds 75 seats out of a total of 151 – which makes it just one seat shy of a majority. While a series of polls put Albanese in the lead, these has narrowed in recent weeks and Labour will be keen not to display any sense of complacency given that the 2019 polls which favoured the party, ended up being far from reality. Pollsters are also assessing the potential impact that the grassroots lobby group, Climate 200 will have on the election which have fielded mostly female candidates in formerly safe inner-city seats and are gaining increasing traction. The impact of these – and other independent candidates – has therefore risen the probability of a hung parliament. As the six-weeks of campaigning draws to a close, the salient issues of the day appear to be climate change, rising Covid cases and concerns over the economic outlook.

At present annualised inflation in Australia stands at 5.1% while the base interest rate is at 0.35%.

Equities- Following Wednesday’s tumble in the equities market which saw the S&P 500 fall 4%?– its greatest one day fall since June 2020 with just one in fifty stocks finishing the day higher – European equities have seen a slight jump during this morning’s session. For example, The FTSE 100 is trading 1.5% higher this morning, with the Spanish Ibex 35 and Italian FTSE MIB index was trading 1% and 0.8%??higher respectively. Similarly, in Australia the S&P/ASX 200 Index rose 1.15% today with tech firms seeing a considerable rebound. Much of these rises were driven by investor sentiment favourably weighing on the surprise 15bpt reduction of China’s five-year loan prime rate, which should help elevate some of the downward pressure on their slowing economy.

Party-Gate- Now that the Met have confirmed that no further fines will be issued in relation to the breaches of Covid regulations in Downing Street, Sue Gray's report can now be released. Most of the report has thus far been redacted given the Met's ongoing investigation, however there is speculation over whether the report will keep the anonymity of the individuals involved. A post-mortem analysis shows that the Met issued 126 Fixed Penalty Notices which went to 83 individuals with the PM and Chancellor receiving one each. Sue Gray’s report is expected to be published sometime next week and hence all eyes will be on the subsequent fall out in and around Westminster.?

Have a great day.

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