(menafn – ecpulse)
U.K. retail sales with auto fuel for the month of November showed a stall, coming weaker than expectations amid high inflation and slight improvement in unemployment. The reading recorded 0.0%, compared to both revised and expected readings of -0.7% and 0.4% respectively, where the annual reading edged up 0.9% from a revised of 0.8%.
The monthly advance is largely attributable to the rise in consumer electricals which soared by 3.8%.
The reading excluding auto fuel surged 0.1% from a revised of -0.5% while the annual reading advanced to 2.0% from a revised up prior of 1.4%.
It seems that the retail sales were affected by the stall in inflation at its high level and unemployment, according to most recent data.
U.K. inflation growth rate, measured by the Consumer Price Index (CPI), stood at 2.7 percent last month, to remain at the highest rate since May and above BoEs target for inflation at about 1.8 percent for the fourth quarter of 2012.
On the other hand, ILO unemployment rate for the three months ended October lingered at 7.8%, yet it showed some improvement as it recorded a drop of 82,000 to 2.51 million, the biggest drop since 2001, similar to both prior and expected readings, whereas employment edged up 40,000 to 29.6 million.
Yet, the same report reflected the weakness in consumer spending as average weekly earnings held at 1.8% in the quarter through October.
Third-quarter growth data due this week (final reading) is predicted to remain unrevised at 1.0% on the quarter and -0.1% on the year.
The BOE decided to hold it monetary stance in December at 0.50% interest rate and 375 billion pounds of asset purchases. Minutes of the meeting showed a unanimous vote to holding interest rate yet the APF voting came 8-1 as MPC member David Miles recalled his bid to increase the size of asset purchases by a further 25 billion pounds to a total of 400 billion pounds.
The MPC said Funding for Lending (FLS) program is showing "encouraging" signs. Thus, FLS is likely to remain BoEs favorite policy tool to bolster credit to households and businesses, as the central bank relies on it to sustain the recovery.
However, the sharp austerity measure remains a major threat to the U.K. recovery, especially after Chancellor of the Exchequer George Osborne said in his Autumn Statement that austerity measures will have to be maintained for longer period that previously anticipated and debt will start dropping a year later than predicted.
He also slashed his growth forecasts and pushed out the term of his budget squeeze by an extra year to 2018. The economy would shrink 0.1 percent this year, and revised the previous estimate of 2.0 percent growth for next year to 1.2 percent, Osborne said.
