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Why Are Retail Sales Low in the United Kingdom?

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Jul. 22 2016, Published 7:43 a.m. ET

Retail sales fell by 0.9%

The Office of National Statistics published the retail sales for June at a six-month low. Retail sales fell by 0.9% on a month-over-month basis—compared to a rise of 0.9% the previous month. Retail sales were also well below the market forecasts of a fall of 0.4%. According to the Office of National Statistics, the United Kingdom’s referendum wasn’t the main reason for the fall. Melanie Richard, who heads the Office of National Statistics retail sales division, thinks that the changeable climate was the major reason for the fall in retail sales—despite the partial offsetting effect of the increase in sales due to the Euro 2016 and Queen Elizabeth’s birthday. The clothing and footwear sector saw a major dip—sales fell by nearly 2%.

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Public sector’s net borrowing

The Office of National Statistics also published the public sector finances report for June on July 21, 2016. The public sector net borrowing fell by 2.2 billion pounds to 7.8 billion pounds in June 2016. The public sector’s net debt rose to 1.6 trillion pounds, which is about 84% of the GDP.

Impact on the market

The iShares MSCI United Kingdom ETF (EWU) reacted negatively to the data release. It ended 0.26% lower on July 21, 2016. The First Trust United Kingdom AlphaDEX ETF (FKU) followed a similar trend—it fell by 0.35%.

British ADRs (American depositary receipts) also came in negative on July 21. Unilever (UL) and Carnival (CUK) fell by 0.53% and 1.4%, respectively. On the same day, banking ADRs were trading on a mixed note—HSBC Holdings (HSBC) fell by 0.28% and Barclays (BCS) rose by 0.25%.

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