FTSE Muted After Consumer Confidence Drop Outweighs Retail Sales Jump
GfK reports UK Consumer Confidence dropped more than expected, while Retail Sales showed an unexpected rise.
Quick overview
- GfK reports UK Consumer Confidence dropped to -23, the lowest since December 2023, due to turbulent financial markets and rising energy costs.
- Retail Sales unexpectedly rose by 0.5% MoM, contrasting with forecasts of a decline, indicating increased consumer spending.
- The FTSE index opened higher but fell by 0.18% after the consumer confidence data, while European indices like the DAX and CAC posted gains.
- The Bank of England is pessimistic about growth, anticipating potential shocks from US tariffs and signaling a possible interest rate cut.
GfK reports UK Consumer Confidence dropped more than expected, while Retail Sales showed an unexpected rise.
- GfK Consumer Confidence -23
- Retail Sales ex fuel MoM up 0.5%
- BoE pessimistic on growth
The FTSE opened slightly higher today in pre-market trading but failed to maintain momentum after the bell. The index is now trading down 0.18% on the day after weaker consumer confidence.
Contrasting Consumer Data
The FTSE fails to follow its peers higher today, as the DAX and CAC both post gains of 0.65% and 0.21% respectively.
GfK Consumer Confidence for April showed a drop to -23 from -19 in March. The research firm said a turbulent financial market and rising energy costs were the main reasons.
Today’s data is the lowest since December 2023, which contrasts with the sharp increase in consumer spending for the same month.
Retail Sales unexpectedly jumped across the board. Sales ex Fuel MoM jumped 0.5% when economists had forecasted a drop of 0.4%.
The all-inclusive Retail Sales MoM also jumped higher than forecasts at 0.4% compared to expectations of a decline by 0.4%.
Nicholas Found, head of commercial content at Retail Economics commented:
“Retailers face an uphill battle to protect margins, sustain investment, and navigate an increasingly complex trading environment,”
FTSE Live Chart
UK Retailers Subdued Forecast
British retailers posted gloomy outlook statements this month; Tesco and Sainsbury’s, the UK’s 2 largest food retailers warned profit growth was unlikely in 2025.
JD Sports also added to the negative sentiment warning of little to no growth even before taking into account the potential impact of tariffs.
BoE Pessimistic on Growth
Governor Bailey said on Thursday that he expected a shock to growth caused by US tariffs and retaliatory tariffs from other countries.
Other members have stated that a trade war could cause deflation, the market has now priced in a 25-basis point interest rate cut at the next MPC meeting on May 8.
The move would bring the central bank rate down to 4.25% from 4.5%, which is still much higher than its peers in the Eurozone.
However, the latest inflation data shows a decrease from 2.8% to 2.6% in March, continuing the trend from 3% in January.
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