Powered by Guardian.co.ukThis article titled “UK retail sales fall at fastest rate in seven years as inflation bites – as it happened” was written by Angela Monaghan, for theguardian.com on Friday 21st April 2017 13.14 UTC

2.14pm BST

Wall Street is expected to open slightly higher:

European markets remain subdued as French voters prepare to go to the polls for the first round of the presidential election on Sunday.

France’s CAC 40 is down 0.1% at 5,072, while the FTSE 100 is up 0.1% at 7,124.

On that note, we’ll close up for the day. Thank you for reading the blog and for all the comments. Have a good weekend. AM

2.04pm BST

Greece’s primary surplus hit 3.9% last year according to the country’s statistics service, ELSTAT. It was well ahead of expectations. Helena Smith reports from Athens

Here in Greece, news of the better-than-expected fiscal performance is being seen as a huge bonus by the leftist-led government, as Euclid Tsakalotos, the Greek finance minister, prepares for crucial talks on the sidelines of the IMF’s annual spring meeting in Washington.

Tsakalotos, who meets IMF chief Christine Lagarde at 9am local time, is expected to argue that Greece should be cut some slack after securing a primary surplus of 3.9% in 2016 – mostly as a result of higher tax collection and massive cuts in public spending.

Eurozone countries and the IMF – funders of the three bailout programmes that have shored up the ailing Greek economy since mid-2010 – are at odds over debt relief and the extent of austerity Athens must apply to achieve future primary budget surpluses once its current bailout ends next year.

The disagreement is central to unlocking funds needed to avert default in July when Greece faces over €7bn in debt repayments.

1.39pm BST

Umunna: fall in retail sales underlines need to stay in single market

Chuka Umunna, the Labour MP, says the fall in retail sales in March and Q1 shows the government must keep Britain in the single market.

Commenting as a supporter of Open Britain, the campaign against a hard Brexit, Umunna said:

The government’s intention to take Britain out of the single market and customs union is clearly putting our economy at risk of suffering a hard Brexit downturn.

The Brexit vote has already plunged the pound to its lowest value in 30 years, putting up prices in the shops. And leaving the single market and customs union will make prices higher still as imported food, fuel and clothes face new barriers to trade.

The government should think again. If they really want to deliver the ‘exact same benefits’ as membership of the EU, they should keep Britain in the single market and customs union.

1.18pm BST

Bank of England’s Saunders moves closer to rate rise

Michael Saunders, a member of the Bank of England’s rate-setting Monetary Policy Committee, has been speaking at the Federation of Small Businesses in London.

He suggested that he is edging closer to voting for a rise in interest rates from the current all-time low of 0.25%.

Saunders expects inflation to be higher than the Bank is currently forecasting and said the MPC was not obliged to delay a rate hike until it was clear on the exact terms and impact of Brexit:

I judge that the current policy stance is clearly accommodative.

While not prejudging what I or the MPC might decide on monetary policy – a modest rise in rates would still imply that considerable stimulus remains in place, helping to support output and jobs.

At the MPC’s most recent meeting, in March, I voted for unchanged policy, especially on the grounds that it would be useful to see a bit more economic data for early 2017. I am not going to announce today how I will vote at the May meeting. There is plenty of data still to receive, and insights to be gained.

I do not believe the MPC is necessarily obliged to delay any policy moves until we have certainty over the exact shape of Brexit and its long-run effects on the economy. We make our decisions from meeting to meeting, and will fulfil our remit during the Brexit process and after it. Any policy decision carries risks that subsequent events make the decision controversial, but that is always the case.

12.30pm BST

Time for a market update. France’s CAC 40 is still in the red this afternoon but losses have narrowed considerably ahead of Sunday’s presidential election.

Here are the latest scores across Europe:

  • FTSE 100: +0.1% at 7,122
  • Germany’s DAX: +0.4% at 12,074
  • France’s CAC: -0.1% at 5,072
  • Italy’s FTSE MIB: +0.2% at 19,893
  • Spain’s IBEX: +0.5% at 10,428

12.09pm BST

Pound slips after weak retail sales

The pound is down 0.2% against the dollar at .2785 after those weaker-than-expected retail sales.

Lukman Otunuga, analyst at the currency broker FXTM, gives his view:

Sterling attracted a school of sellers on Friday, following the disappointing 1.8% decline in UK retail sales in March that rekindled fears of Brexit impacting the UK economy.

With wage growth lagging behind inflation, concerns may continue to heighten over the longevity of the UK’s prized consumer-driven economic growth. The pound remains gripped by the Brexit developments as they continue moving forward and heightened political uncertainty created from the snap general election shocker should limit extreme upside gains.

11.49am BST

UK growth expected to slow to 0.4% in Q1

UK economic growth slowed to 0.4% in the first quarter from 0.7% in the previous quarter, figures published next week are expected to show.

That is the view of economists polled by Reuters ahead of the first official snapshot from the ONS on 28 April.

Alan Clarke, economist at Scotiabank, says that the risks to his forecast for Q1 growth of 0.4% are now to the downside.

11.37am BST

Britain’s economic slowdown has begun, says former MPC member

Andrew Sentance
Andrew Sentance

The sharp fall in retail sales in the first quarter is the clearest sign yet that a UK slowdown is underway, according to Andrew Sentance, a former member of the Bank of England’s Monetary Policy Committee.

Now a senior economic adviser at PwC, Sentance says:

These latest retail sales figures show that the post-Brexit surge in consumer spending has come to an abrupt end.

It is not surprising to see consumers reining in their spending. Inflation has caught up with pay growth, so real incomes of workers are no longer rising. Employment growth has also slowed sharply over the past six months, even though unemployment remains historically low.

The recent period of strong consumer spending growth also relied on households running down their saving and increasing borrowing. That pattern of behaviour is not sustainable in the longer term and at some point consumers will start to rein in borrowing and rebuild their savings.

For all these reasons, we should see these retail sales figures as the start of a period of much weaker consumer spending growth – which will act as a drag on the overall progress of the UK economy over this year and next.

This is the clearest indication yet that the expected slowdown in the UK economy has begun, and we should expect to see this confirmed in other economic data over the next few months.”

11.13am BST

Average shop prices (including fuel), increased by 3.3% over the year to March, which was the sharpest rate of growth since March 2012.

The biggest contribution came from petrol stations, where average prices rose by 16.4% year-on-year.

The graphic below shows how sales fell as prices rose:

ONS retail sales March 2017

Updated at 11.13am BST

10.41am BST

UK growth ‘to slow’ after weak Q1 retail sales

Those poor retail sales (down 1.8% in March, and 1.4% over the first quarter) are expected to weigh on UK growth over the first quarter.

Consumer spending has been the main driver of growth since the financial crisis, but these figures suggest a growing reluctance to spend as a Brexit-related squeeze on household finances gets underway.

Martin Beck, senior economic advisor to the forecasting group, the EY ITEM Club, says growth could slow to 0.4% or 0.5% in the first quarter of 2017, from 0.7% in the fourth quarter of 2016.

March’s weakness was broad-based, with department stores the only major sector to see sales volumes increase on the previous month. The likely culprit for this weakness remained a familiar one – rising shop price inflation. This reached 3.3% year on year in March, a pace not matched since March 2012.

With the retail sector accounting for around 5% of GDP, Q1’s decline in sales will have shaved close to 0.1 percentage points off GDP growth in that period. Combined with a poor set of macro data from other sectors, growth looks likely to have slowed from 0.7% in Q4 2016 to around 0.4-0.5%.

Looking ahead, the boost to the tradable sector from the weak pound and a buoyant world economy should mitigate weakness on the consumer side. But the dominance of the latter in the economy means that a shift in the source of growth is likely to come at the price of a further slowdown in the pace of expansion.

The ONS will publish the first official estimate of first-quarter growth on 28 April.

10.29am BST

Richard Lim, chief executive of Retail Economics, says Britain’s retail industry is facing a “toxic mix” of factors:

This latest data shows that the surge in inflation is putting retailers under intense pressure with the first quarterly decline in retail sales since 2013. Families are facing the fastest rise in living costs for over three years and they are reining in their spending rapidly.

We’re concerned for the outlook for the retail industry given the toxic mix of rising operating and sourcing costs against a backdrop of weaker consumer demand and heightened political and economic uncertainty.

Indeed, recent research conducted by Retail Economics found 43% of consumers suggested they had adopted more cautious spending habits over the last three months citing Brexit and personal finances as their main concerns.

Furthermore, we forecast that real earnings are likely to start to shrink by mid-2017 which will put further pressure on the retail industry.

10.06am BST

Retail sales fall at fastest rate in 7 years in first quarter

In the first quarter overall, UK retail sales fell 1.4%, which was the biggest quarterly fall since 2010.

It looks like consumers are less willing to spend now that the impact of the weaker pound is translating into higher shop prices.

The pound is currently 14% lower against the dollar than it was on the day of the EU referendum in June. A weaker pound makes goods imported from abroad more expensive.

Kate Davies, senior statistician at the ONS, said prices are rising across the board:

Today’s retail sales figures show a decline on the month and on the three months to March, which coincides with quarter 1 in 2017. This is the first time we’ve seen a quarterly decline since 2013, and it seems to be a consequence of price increases across a whole range of sectors.

Howard Archer, chief UK economist at IHS Markit, says the retail sales figures are “dire”.

9.38am BST

UK retail sales fall 1.8% in March

Breaking: Here in the UK the headline retail sales are a bit of a shocker.

The volume of retail sales fell 1.8% between February and March according to the Office for National Statistics, far worse than the 0.2% dip predicted by economists.

It was also a big reversal in fortunes compared with the month earlier, when sales were up 1.7% (that was revised up from 1.4%).

More soon.

9.31am BST

Eurozone: PMIs signal strong start to second quarter

Those stronger-than-expected French PMIs have boosted the broader eurozone, helping to drive the PMI for the single currency bloc to a fresh six-year high.

Markit’s flash eurozone PMI composite index takes a snapshot of the manufacturing and services indices across the region. The headline index climbed to 56.7 in April from 56.4 and beat expectations of 56.3.

While growth in France accelerated, it moderated in Germany. The headline composite index for Germany fell to 56.3 in April from 57.1 in March.

Chris Williamson, chief business economist at IHS Markit, said the April PMIs put the eurozone economy on track to grow by 0.7% in the second quarter:

The eurozone economy has enjoyed a strong start to the second quarter. The April flash PMI is running at a level consistent with 0.7% GDP growth, up from 0.6% in the first quarter. Such strong growth, if sustained, will inevitably lead to upward revisions to economists’ 2017 forecasts.

8.51am BST

Euro slips from three-week highs

The euro hasn’t been able to hold on to the gains made on Thursday. Having hit a three-week high of .077 yesterday, the euro is currently trading at .0722.

The euro was trading at .0722 on Friday morning
The euro was trading at .0722 on Friday morning

Updated at 8.53am BST

8.36am BST

French shares fall in early trading

Following Thursday’s surge in French shares – buoyed by forecasts that independent candidate Emmanuel Macron would win the presidential election – investors are more subdued this morning. The CAC 40 is down 0.5%.

Here is how markets are looking across Europe:

  • FTSE 100: +0.04% at 7,121
  • Germany’s DAX: -0.1% at 12,021
  • France’s CAC: -0.5% at 5,053
  • Italy’s FTSE MIB: -0.1% at 19,834
  • Spain’s IBEX: +0.1% at 10,382

8.19am BST

France: strong growth signalled in April

Markit’s flash French PMI surveys for April have easily beaten expectations, suggesting growth in the private sector accelerated this month.

French Tricolore FlagThe french Tricolore flag on a brushed metal backgound

Activity in both the manufacturing and services sector was better than expected, boosting the combined index to 57.4 in April from 56.8, where anything above 50 indicates growth.

That was far better than the 56.2 predicted by economists in a Reuters poll, and suggests the French economy was gaining momentum ahead of Sunday’s election.

Alex Gill, economist at IHS Markit, said French firms had shrugged off uncertainty posed by the election:

The numbers provide further evidence that the French private sector remains resilient to political uncertainty around the upcoming presidential election.

Indeed, business optimism hit a multi-year high in April, with a number of respondents anticipating favourable business conditions following its conclusion. This has, in turn, encouraged firms to take on additional staff members.”

Updated at 8.22am BST

8.05am BST

7.53am BST

Traders at spread betting firm IG are expecting European markets to open higher this morning:

7.52am BST

The agenda: France in focus as election looms

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Investor minds will be focused on France as voters prepare to head to the polls for the first round of the presidential election on Sunday.

The election result is expected to be far-reaching, not only dictating domestic policies in France but potentially determining the future of the EU.

Michael Hewson, chief market analyst at CMC Markets UK, gives his take on how the markets might digest the result.

With all eyes on the first round of the French presidential vote this weekend, the France CAC 40 outperformed yesterday as markets started to price in the prospect of the independent candidate Emmanuel Macron making it through to the second round of voting against Marine Le Pen, or possibly Jean Luc Melenchon who has enjoyed a late surge in the polls.

Whether it will be enough to deliver him into the second round is debatable, but markets are starting to price in the prospect that Macron will probably win a contest between either of the other two contenders.

Let’s hope he doesn’t get squeezed out, particularly in light of last night’s terrorist attack in Paris, which given the tightness of the polls, could influence events, leaving investors to face the prospect of a face-off between Marine Le Pen on the right and Melenchon on the left. Any such outcome is unlikely to be well received by the markets.

Also coming up today…

PMI surveys for April will give the earliest indication of how the manufacturing and services sectors in France, Germany, and the wider eurozone were performing at the beginning of the second quarter.

Here in the UK retail sales figures for March will offer an insight into whether consumers remained willing to splash out on new purchases despite rising prices.

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