UK Retail sales come in weaker than expected

- Pound falls to a session low against the euro -

Date: January 22, 2010

Activity fell on the high street in the last month of 2009, as British retail sales figures came in weaker than expected today.

Consumer spending rose only 0.3 pc last month, a third less than the expected 1.1 pc rise forecast by city analysts. It was the weakest December retail sales figure since 2007.

Sterling fell across a basket of currencies in response to the news, hitting a session low, falling 0.37 pc against the euro €1.1451 and against the US Dollar to around $1.6190 from $1.6230.

Mark Bolsom, Head of the UK Trading desk at Travelex, the world’s largest non-bank FX Payments Specialist, said, “We were expecting that the UK’s retail figures would be supported by a surprise fall in unemployment. However, whilst our labour market is steadying, the downside is that with inflation increasing, prices are going up, and our earnings growth is steadily weakening – which therefore is affecting our spending habits on the high street.

“This is exacerbated by the prospect of fiscal tightening, with higher taxes and spending cuts promised by the government, an ongoing threat of interest rate hikes, and tight credit conditions - people are really feeling the pinch. They are uncertain of their financial future and can’t afford to spend extravagantly.”

Bolsom continues, “There has been growing evidence from the markets that economic conditions in the UK are expanding and contraction has halted. However, given that consumer spending accounts for about 65 per cent of the UK’s GDP, these latest figures will not provide much comfort to the markets that Britain is on the road to recovery.”

Ends

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Jessica Buttress
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Jessica.buttress@travelex.com

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Founded in 1976, Travelex is the world’s largest non-bank foreign exchange and payments specialist; with operations across four continents and 6,000 employees worldwide.

Travelex holds key positions in its three main areas of activity: Global Business Payments (TGBP, which includes Travelex Personal Payments), Currency Services and Card and Mobile Payments. Every year, more than 35,000 corporate clients and 30 million customers trust Travelex to manage their foreign exchange requirements.

Recently recognised by TowerGroup research as Industry Leader for payments innovation for SMEs, Travelex currently handles international payments for over 750 large corporate and financial institutions.

Visit www.travelexbusiness.com/uk for more information or email the press office at jessica.buttress@travelex.com