UK Retail Sales Rise

UK retail sales rose higher-than-expected this morning having increased 0.5% on a month-on-month basis for April. This beat market expectations of a 0.3% rise and came after a 1.2% fall last month. According to the ONS’ chief economist, “retail sales grew, partially rebounding from a poor weather-affected March, with jewellers, sports retailers and department stores all having a good month.” This higher-than-expected print also involved department store sales rising 1.7%, indicating a rise in discretionary spending as consumer confidence ticked up.

In April, government benefits also rose in line with September 2022’s level of inflation (10.1%) and thus additional income is thought to have helped lift some household finances. Food stores’ sales volumes for example rose 0.7%, though remained 2.7% below pre-pandemic levels. Last year, the ONS’ data indicated UK retail sales over 2022 witnessed their worst year since records began in 1997. 

US GDP is Upwardly Revised

Yesterday saw markets weigh on an upward revision for US Q1 growth. US GDP grew 1.3% on an annualised basis over the first quarter of 2023, coming in above the last estimate of 1.1% print, but sharply down from last quarter’s print of 2.6%. While this was the third consecutive quarter that the US economy grew, business investment showed signs of drying up as interest rates continued to rise to their highest level since 2007. The figure was marked by consumer spending rising by 3.8% - demonstrating buoyed consumer confidence, despite protracted inflation and household budgets being squeezed. 

Equities Update

Investor sentiment across US equity markets were buoyed yesterday on some progress made around debt ceiling talks. According to some sources the Republican and Democratic negotiators are just $70bn apart on a possible deal. AI related stocks were also lifted by chipmaker Nvidia’s share price rising some 24% following strong Q1 results. More generally, yesterday’s session saw the S&P 500 close 0.88% higher while the tech heavy Nasdaq rose 1.71%. In the UK however, the FTSE 100 ended Thursday 0.7% lower with the index being weighed down by the prospect of further hikes from the BoE.

Oil Prices Decline Following Novak’s Comments

Yesterday saw oil prices slide over 3% as the Russian Deputy Prime Minister Alexander Novak provided comments which contrasted with previous remarks from the Saudi energy minister around further possible cuts from OPEC+. Earlier this month, the Saudi energy minister Prince Abdulaziz bin Salman would make further cuts ahead of their next meeting on 4th June. However, yesterday Novak seemed to downplay the prospect of these cuts saying that he did not think these were likely. WTI crude futures are currently trading around $72 dpb. Earlier this year, OPEC+ said that they would look to reduce output by some 1.16 million barrels per day from May until the end of 2023.

Behind the Headlines on US Corporate Profit Data

As Q1 GDP beat expectations, corporate profits over Q1 saw a considerable decline, falling 6.8% to their lowest level since Q2 2021. The scale of the decline far surpassed expectations of a 0.9% fall, though this data includes profits from the Federal Reserve which given losses on their gargantuan bond portfolio (brought about by rising interest rates), means the data is heavily skewed by the Fed’s weight. In fact, when we discount for the Federal Reserve, corporate profits hit an all-time high, though the pace of growth slowed from previous quarters.