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Could weak retail sales data see Bank leave rates unchanged?

ended 20. October 2023

Retail sales volumes fell by 0.9% in September 2023, following an unrevised rise of 0.4% in August 2023, according to official data published this morning. Experts are divided on whether this could see the Bank of England press the pause button at the next Monetary Policy Committee meeting in November.

According to John Choong, senior equity research analyst at Investing Reviews: “Following today's retail sales data, it is clear there is a slowdown in consumer spending, with the latest GfK consumer confidence survey also indicating that the outlook for personal finances sank substantially in October. Consequently, this could mean that the Bank of England may not have to raise Bank Rate by another 25bps next month. However, investors will have to hope that next week's unemployment and PMI numbers come in weaker than expected in order for the Monetary Policy Committee to hold their foot off the rate-hiking pedal.”

For Peter Stamford, director at Moor Mortgages, such weak retail sales data could see the Bank of England stay its hand next month: "With retailers hitting a rough patch, I suspect the Bank of England might just hit the pause button in November. With retail sales dipping and consumer confidence waning, it's a sign that people are tightening their belts. Threadneedle Street might decide it's not the moment for another rate hike, giving borrowers and businesses a much-needed breather."

Justin Moy, managing director at Chelsmford-based EHF Mortgages, agreed: “You have to feel for retailers but for mortgage rates this is good news. This slowdown in consumer spending is exactly what increasing the base rate is supposed to achieve. This certainly adds significantly to the likelihood of the Bank of England holding the base rate steady for another month. With significant numbers of borrowers changing to much higher rates over the coming months, we could see spending fall off a cliff, even with Christmas on the horizon.”

But Ranald Mitchell, director at Norwich-based Charwin Private Clients, believes the Monetary Policy Committee members will vote for another hike: "We remain a considerable way off the 2% target and with inflation broadly flatlining, they will likely decide to raise the base rate again. Borrowers will feel the pain as a result, and house prices could see further downward pressure as potential buyers are deterred by the current economic conditions."

Stephen Perkins, managing director at Norwich Yellow Brick Mortgages, also thinks another hike in Bank Rate is still likely: “Retailers have seen their costs continue to increase and sales drop in what is usually a pre-Christmas swell. All small businesses will be looking to the Bank of England for some mercy on the next base rate decision, but they haven’t shown much regard for SMEs over the past 12 months. Despite this poor retail sales data we could still get a 0.25% hike.”

Bob Singh, founder at Chess Mortgages, said it's a tough call for the Bank of England either way: “With consumers tightening their belts, it seems the medicine is working. The Bank of England has another tough decision to make. Do they keep rates on hold and let the pound slide further or raise them to keep sterling strong?”

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6 responses from the Newspage community

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Ranald Mitchell
Director at bad credit mortgage specialists Charwin Mortgages
Declining retail sales are good news for inflation, but they don’t bode well for retailers at a critical time in their sales calendar. With so many other moving parts in play, the Bank of England has their work cut out. We remain a considerable way off the 2% target and with inflation broadly flatlining, they will likely decide to raise the base rate again. Borrowers will feel the pain as a result, and house prices could see further downward pressure as potential buyers are deterred by the current economic conditions.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
Retailers have seen their costs continue to increase and sales drop in what is usually a pre-Christmas swell. All small businesses will be looking to the Bank of England for some mercy on the next Base Rate decision, but they haven’t shown much regard for SMEs over the past 12 months. Despite this poor retail sales data we could still get a 0.25% hike.
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Justin Moy
Managing Director at EHF Mortgages
You have to feel for retailers but for mortgage rates this is good news. This slowdown in consumer spending is exactly what increasing the base rate is supposed to achieve. This certainly adds significantly to the likelihood of the Bank of England holding the base rate steady for another month. With significant numbers of borrowers changing to much higher rates over the coming months, we could see spending fall off a cliff, even with Christmas on the horizon.
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Editor
Bob Singh
Founder at Chess Mortgages
With consumers tightening their belts, it seems the medicine is working. The picture could change next month as Xmas spending starts in earnest but consumers are watching the pennies more than ever at present. The sales could even start earlier than ever to entice hard-pressed consumers to start spending sooner. With the exception of the USA, the international scene is much of the same with China and Japan more or less static in the CPI figures. The pound is much weaker in the wake of this news. The Bank of England has another tough decision to make. Do they keep rates on hold and let the pound slide further or raise them to keep sterling strong? With colder weather upon us, clothes sales should accelerate again and help next month's figures.
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John Choong
Senior Equity Research Analyst at Investing Reviews
Despite headlines this week claiming that oil prices were to blame for September's sticky inflation figure, the devil lies in the details. In fact, the main culprit was actually services inflation. The most notable price increases came from restaurants and hotels, as businesses continue to retain their pricing power due to strong demand. Following today's retail sales data, it is clear there is a slowdown in consumer spending, with the latest GfK consumer confidence survey also indicating that the outlook for personal finances sank substantially in October. Consequently, this could mean that the Bank of England may not have to raise bank rate by another 25bps next month. However, investors will have to hope that next week's unemployment and PMI numbers come in weaker than expected in order for the Monetary Policy Committee to hold their foot off the rate-hiking pedal.
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Peter Stamford
Mortgage Expert at Stamford Home Finance
With retailers hitting a rough patch, I suspect the Bank of England might just hit the pause button in November. With retail sales dipping and consumer confidence waning, it's a sign that people are tightening their belts. Threadneedle Street might decide it's not the moment for another rate hike, giving borrowers and businesses a much-needed breather.