Davy Research |
|
Market Comment
Collapse in UK consumer confidence in April
11 May 2012
Conall Mac Coille
The Nationwide Index of UK consumer confidence released this morning showed a sharp fall in the survey from 53 to 44 in April. The improvement in the index from a trough of 38 in October to the high in March had been viewed as one factor explaining the puzzling strength of UK retail sales through the winter months.
However, today's confidence data chime with the release of the British Retail Consortium's (BRC) measure of like-for-like sales in April earlier this week. The BRC measure indicated a 3.3% decline on the year in April, suggesting that the apparent strength of retail sales through the winter months will be temporary.
So the outlook for the UK consumer remains bleak with spending likely to be held back by weak nominal pay growth and persistent price pressures. Indeed, in February, average weekly earnings were up by just 1.1% on the year compared with the current rate of CPI inflation at 3.5%.
Overnight, data released on the Chinese economy suggest further evidence of a marked slowdown. Following the surprise news yesterday that exports grew by just 4.9% in the year to April, industrial production was also weaker than expected – up 9.3% on the year but well below the 12.2% expected. Retail sales and fixed investment growth were broadly as expected at 14.1% and 20.2% annual growth respectively.
Chinese consumer price inflation fell back from 3.6% in March to 3.4% in April. Waning price pressures may allow the Chinese authorities more scope to implement stimulus measures. However, on balance, markets have reacted negatively to the news on the health of the Chinese economy. Furthermore, stock index futures for the S&P500 indicate a small decline following the news of a $2bn dollar trading loss by JP Morgan. So the overnight news on China will restrain market sentiment this morning.