Articles > Consumer Spending Increases
Like the majority of homeowners across the country, we were all waiting for another drop in interest rates this October. Unfortunately it was not to be, with the MPC deciding it was best if the rates remained stationary. They look set to remain the same until early next year at least, when many believe that they will rise.
The reason rates did not fall was that the MPC wanted to see how consumer spending would react to the earlier rates cuts and the approaching Christmas season, and high street spending is apparently now on the increase. Consumers are spending more money in shops, which is causing rising inflationary pressures.
From the year ending September, high street sales were actually up 3.1 percent, an increase of 0.2 percent from August and 1.1% on July. Although things are not getting worse, the situation is not improving enough to justify a rise in interest rates. The British Retail Consortium are still urging the Monetary Policy Committee to drop interest rates further, even though the BRC have results from last month retail research suggesting that consumer spending is increasing.
The rise in consumer spending was unexpected, due to the warm start of September and October and, winter clothing collections have not been launched as of yet. The clothing sector is probably the most important in retail and with the warm start to the autumn months predictions were glum. This is why the increase in high street spending has come as such a shock, and another reason the interest rates have neither fallen nor increased.
The rise in petrol prices are a speculative reason for why goods leaving factory gates are rising by 0.7%, which is beyond what was forecast. In a way, it seems as though nobody really knows what is going to happen. The Bank of England are playing it safe for the mean time, as changing the interest rates again in this half of the year, and with the Christmas period which traditionally sees the high-street tills ringing almost upon us, they will not want to unsettle the economy.
