DAVY VIEW

Retail sales fell in September compared to an upward-revised result in August, and October’s consumer confidence was also below consensus expectations. The summer months had seen retail sales improve, with the “Burnham bounce” and World Cup possible factors contributing to a more upbeat mood for consumers. However, the sell-off in global government bonds since September has already resulted in tighter financial conditions in advance of next week’s well-flagged hike to Bank Rate, with mortgage rates and energy prices both moving higher. Allied to uncertainty about next week’s Budget, we now expect retail sales – and economic growth – to be weaker into Q4.