The market is getting rattled by the possibility of rate hikes, as fears grow that the UK might slide into a recession. These concerns have put pressure on the pound, causing it to dip to $1.2688 against the dollar during a turbulent session. However, there is a glimmer of hope in the retail sector, as May’s retail sales figures unexpectedly show a 0.3% bounce, thanks to good weather and the Coronation Bank Holiday. On the other hand, a closely-watched business survey indicates a cooling growth in June, signaling a potential loss of momentum in consumer spending. Fiona Cincotta, a market strategist at City Index, attributes the pound’s fall to recession fears. Despite this, a recent report from the Office for National Statistics suggests that consumers are weathering the cost of living squeeze, with retail sales volumes rising by 0.3% in May. However, the purchasing managers’ index (PMI) reveals that private sector growth is cooling down, indicating a loss of momentum after a brief growth spurt in the spring. Elizabeth Martins, a senior economist at HSBC, believes this data may be a last hurrah before the slowdown hits. Nonetheless, falling energy prices can be a positive factor for economic activity and may alleviate concerns of an impending recession.
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