THE pound rocketed through the totemic $1.30 mark for the first time in eight months after latest consumer spending figures confounded gloomy forecasts.

Brexit joy as consumer spending figures quash gloomy forecasts with rocketing pound

Turmoil in America where President Donald Trump is embroiled in allegations worked in the pound’s favour and against the Dollar.

But sterling was also up across the board against its major counterparts, including the Euro.

The developments show the UK economy continues to thrive despite predictions last year that a vote for Brexit would send it into a nosedive.

David Lamb, head of dealing at FEXCO Corporate Payments, said: “Britain’s wage squeeze may have scotched any slim hope of the Bank of England raising interest rates this year, but the UK economy continues to create jobs at a prodigious rate and its retail boom is still in full swing.

“For now the markets, and the Bank, seem to have accepted short-term inflation as the new normal, and are instead focusing on the economy’s underlying momentum.

“This confidence has sent the Pound rocketing not just against the struggling Dollar but the Euro too.”

The 0.5 per cent boost in the pound’s value against the dollar was sparked when the Office for National Statistics said last month’s retail sales were 2.3 per cent higher than in March, and up 4 per cent on April last year.

This confidence has sent the Pound rocketing not just against the struggling Dollar but the Euro too

David Lamb

The figures were double market forecasts of just 1 per cent monthly and 2 per cent year-on-year rises.

Good weather and a late Easter were seen as factors.

However, comparing the latest three months with the previous quarter – which partially removes such fluctuations – sales were also up, by 0.3 per cent, following a previous dip.

The figures were a welcome turnaround from last month when the ONS said retail sales had taken their biggest tumble for seven years in the three months to March as household spending responded to rising living costs – partly blamed on a slump in the pound’s value since last year’s EU referendum.

Ian Gilmartin, head of retail and wholesale at Barclays, agreed good weather and Easter contributed to the latest higher sales but added: “Although these factors will certainly have contributed, the scale of the increase has perhaps exceeded even the most optimistic expectations, and this really is a great result for the sector.”

Ian Geddes, head of retail at Deloitte, said: “Online sales have been particularly strong over the last few months and April is no different; online retail is up 19 per cent from last year and now accounts for 15.6 per cent of all retail spending. Indeed, UK consumers spent £1billion a week online in April.

“Clearly, the retail industry is still benefiting from strong spending growth after a sustained period of broadly confident consumers that are benefiting from low interest rates and record levels of employment.”

But he warned retailers at some point would have to pass on rising inflation to their customers through price hikes.

The higher sales come despite wages are rising at a slower pace than inflation for the first time for two-and-a-half years, as the ONS reported on Wednesday.

Ben Brettell, senior economist at Hargreaves Lansdown, said: “The theory went that squeezed household budgets would likely hit retailers in the pocket too.

“But in fact the figures beat expectations handsomely.

“The balance of probability suggests that at some point the combination of higher inflation and lacklustre wage growth will take its toll on the UK consumer.

“But today’s numbers provide some welcome evidence the economy has made a brighter start to the second quarter following disappointing GDP growth of 0.3 per cent in the first quarter.

“With the labour market looking relatively robust, it’s possible the current mood of pessimism is unjustified.”

Chris Saint, Senior Analyst, HL Currency Service, added: “The figures may have been flattered by warm weather and this year’s later timing of Easter, but perhaps serve as a timely reminder not to underestimate the resilience of consumers despite the tightening squeeze on household budgets coming from rising inflation and muted earnings growth.”

The FTSE 100 index continued to slide, partly as a response to traders seeing a stronger pound as bad news for British exporters, as well as the US turmoil overshadowing global stock markets.

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