Export fears as UK retail sales suffer biggest fall in seven years
UK retail sales suffered their biggest quarterly fall in seven years last month, suggesting the weaker pound is denting the willingness of consumers in Britain to spend.
The data - branded as "dire" by one economist - signals bad news for Irish exporters selling into the British market.
Sterling grew fractionally weaker on the back of the figures yesterday, which showed retail sales volume contracted by 1.4pc in the first quarter. That compares with a rise of 0.8pc in the last three months of 2016, according to the Office for National Statistics.
It was the weakest quarter since 2010.
Howard Archer, chief economist at IHS Markit, described the data as "absolutely dire".
The UK economy has so far largely shrugged off any projected Brexit impact, but with inflation set to rise above the Bank of England's own 2pc target this year, economists have flagged the potential for consumer confidence to suffer as the weak pound drives up prices.
The London-based Centre for Economics and Business Research (CEBR) predicted further pain for UK consumers.
"Although the pound has most recently gained against other major currencies following the announcement of a snap election in June, it remains well below pre-Brexit vote levels," said Oliver Kolodseike, CEBR senior economist.
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"While a weak pound should generally boost exports, it makes imports more expensive. It is therefore likely that retailers will have to up their prices in coming months in order to compensate for rising input costs and protect their profit margins which would exert additional pressure on already tight household budgets."
Any softening in consumer demand in the UK could have a knock-on effect in Ireland given the level of exposure here to the UK economy.
The weak pound has already hit firms in the exporting sector, as it makes their products more expensive, and therefore less attractive. Companies in the food and drink sector here are particularly vulnerable, given the extent of the sector's exposure to the UK market. "Consumer spending has been the key engine of the UK's economic growth in recent years, but this trend is set to diminish in 2017," Mr Kolodseike added.
The pound slipped against both the dollar and euro - putting further pressure on exporters here. It had recently seen a marginal recovery in the wake of Prime Minister Theresa May's announcement of a snap general election.
The pound was 0.2pc off at $1.2784, more than a cent off highs hit after Mrs May's shock election announcement. It was off 0.1pc at 83.72p per euro.
David Lamb, head of dealing at FEXCO Corporate Payments, however said the movement in sterling was relatively muted.
"The pound's knee-jerk plunge against the dollar was quickly corrected as sterling hovered around the levels it has stuck at ever since Tuesday's surprise election announcement," he said.
"Though the pound's rally against the euro has been flattered by niggling doubts over the French election... it also suggests sterling has found a new resilience."