Must read: UK retail sales, Halifax house prices, Carlsberg

Our head of investment rounds up the morning's big news.

UK BRC-KPMG RETAIL SALES MONITOR 

The British Retail Consortium (BRC)’s like-for-like retail sales measure grew by 3.9% in January year-on-year versus 6.5% in December. Total January sales were up 4.2% slowing from 6.9% in the previous month.

January almost always tends to see a seasonal slowdown in retail sales as the glow of the Golden Quarter fades and the Christmas hangover sets in. With double-digit inflation, rising mortgage rates, low consumer confidence and sluggish growth, retailers are in a tough spot, desperately trying to attract customers through offers and discounts which puts further pressure on margins.

Although food and drink sales have remained robust, this has been driven by inflation-boosted price increases rather than higher volumes, with shoppers switching from labelled to own brand ranges to reduce their bills. However, it wasn’t all bad, with demand for energy efficient appliances and men’s clothing still holding up. Plus, with Covid restrictions all over, petrol prices easing, and the potential for the UK economy to narrowly stave off a recession, the report’s shopper confidence index hit a one-year high.

UK HALIFAX HOUSE PRICE INDEX 

UK Halifax house prices remained flat in January versus a drop of 1.5% in the previous month. Year-on-year growth slowed to 1.9% compared to 2.1% in December. The typical UK property price stands at £281,684 down from £281,713 last month. The rate of annual growth slowed across all nations and regions in January, with the average house price around £12,500 below its peak from August last year but £5,000 higher than January 2022. 

Property transactions and mortgage demand have been slowing, weighed down by the Bank of England’s ten consecutive rate rises, as the central bank looks to curtail borrowing in an attempt to stem stubbornly higher double-digit inflation levels in the UK. Potential buyers have been holding off with the hope that the housing market will cool further this year and mortgage rates will ease off. 

Just this week, Bank of England policymaker Catherine Mann indicated the central bank is likely to raise rates again, which will add to the cost of borrowing for mortgage holders, particularly for those on variable rates. However, looking further ahead, the central bank could pause on interest rates or even cut rates later this year, which could help support the housing market, particularly if the economic downturn reveals itself to be less aggressive than previously feared. 

The UK housebuilders suffered painful stock market losses last year but shares in Taylor Wimpey (LSE:TW.) and Persimmon (LSE:PSN) are both up by around 15% so far in 2023, reflecting the prospect that we could be approaching the peak for UK interest rates.

CARLSBERG

Carlsberg said group results were well ahead of pre-pandemic 2019 levels excluding Russia, with revenue up 20% and operating profit up 22%. Fourth quarter sales increased by 6% to 14.6 billion Danish crowns, just below analysts’ expectations. It said 2023 be another challenging year with the development of the war in Ukraine a key uncertainty. 2023 organic operating profit growth is expected to come in below last year’s level with growth  between -5% and +5% versus 12% growth last year. 

Pressures from cost inflation and high prices, which are weakening demand for beer, have been key headwinds for Carlsberg. Although shares have been attempting to regain ground since November, the stock is still down around 10% over a one-year period as the weakening consumer backdrop with pressures from the cost-of-living and its exit from Russia weigh on the business.