UK DATA: BRC Aug Retail Sales Look Strong But Boosted by Food Inflation
BRC Shop Sales data for August shows a 3.1% Y/Y increase in total retail sales (vs 2.5% Jul, 1.0% Aug '24), above the 12-month average of 2.0%. Like-for-like sales grew by 2.9% Y/Y (vs 1.8% Jul, 0.8% Aug '24).
- High summer temperatures, the August rate cut and back-to-school purchases are highlighted as drivers by the BRC. However, with goods inflation (particularly food inflation) running at a fast pace, sales look a lot less impressive and there may be some boost here from calendar effects.
- The data covers the four weeks from 3-30 August 2025 (which includes the whole last August bank holiday weekend) while last year's four weeks (28 July to 24 August) only included up to the Saturday of the Bank holiday weekend.
- Food sales (the largest contributor) increased 4.7% Y/Y (vs 3.9% Jul, 3.9% Aug '24), above the 12-month average of 3.3%. This isn't much higher than food cost inflation so volumes don't appear to be increasing that much. Furthermore, the hot weather likely boosted food sales. Rising energy bills and looming fears of tax hikes in the Autumn Budget call into question whether the strength seen over summer will continue.
- Non-food sales rose 1.8% Y/Y (vs 1.4% Jul, -1.4% Aug '24), above the 12-month average of 1.0%. The press release points to increases in sales of home-related goods due to moderate summer housing market growth and the spike in property transactions ahead of the April Stamp Duty changes.
- This release comes after last Friday's ONS July retail sales data, which saw a number of downward revisions to prior data. Note that the ONS data is a volume index (as opposed to the BRC's value index).
- Looking ahead, the press release notes that "with the later-than-expected Budget falling just days before Black Friday, many [retailers] are uneasy about how consumer confidence and spending could be impacted by tax rise speculation in the run-up to Christmas."
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AUSSIE 10-YEAR TECHS: (U5) Recovers With Treasuries
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.960 - High Apr 7
- PRICE: 95.710 @ 14:34 BST Aug 8
- SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.707 - 1.0% 10-dma envelope
Aussie 10-yr futures received a boost from the US Treasury rally that followed a poor NFP print. This keeps Aussie 10-year futures toward the top end of the recent range. To the upside, next resistance is at 96.207, a Fibonacci retracement point. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
SECURITY: Trump To Sign Trilateral Peace Accord With Armenia/Azerbaijan Shortly
US President Donald Trump is shortly due to sign a trilateral peace agreement with Armenian Prime Minister Nikol Pashinyan and Azerbaijani President Ilham Aliyev at the White House. LIVESTREAM The event will provide another opportunity for Trump to style himself as peacemaker, after touting success in brokering peace deals between Rwanda/Congo, Cambodia/Thailand, and India/Pakistan.
- The accord aims to resolve a decade-long dispute over the sovereignty of Nagorno-Karabakh - a breakaway Azerbaijani province that was under de facto Armenian control from the dissolution of the Soviet Union until a 2020 war.
- Trump described the meeting on Truth Social as a “historic peace summit,” noting that the US will also sign “Bilateral Agreements [to] fully unlock the potential of the South Caucasus Region.”
- White House spokeswoman Anna Kelly told reporters that Trump would sign deals with both Armenia and Azerbaijan on energy, technology, economic cooperation, border security, infrastructure and trade.
- A White House official said: "It's about the entire region, and [the leaders] know that that region is known to be safer and more prosperous with President Trump."
- Reuters reports that the US will have development rights to build transportation links in the strategic Zangezur Corridor, a mountainous stretch of Armenian territory between Azerbaijan and its Nakhichevan exclave.
- Politico notes: “But whether this is just a photo opportunity or a lasting end to a conflict that has undermined stability in a region dominated by Russia and Iran will depend on whether the US can address several key challenges.”
FED: Balance Sheet Runoff Continues At Steady $20B/Month Pace (2/2)
Fed asset holdings were little changed in the past week. SOMA runoff totaled $2.8B (composed of $4.2B less nominal Tsy holdings and $1.4B more TIPS), with emergency lending/liquidity facilities $0.7B lower.
- Over the last 4 weeks, the $20B/monthly expected QT pace was roughly adhered to: MBS fell $18B, with Treasury net holdings down around $2B (a fall in TIPS holdings offsetting a slight rise in nominals).
- Discount window usage accounted for the fall in lending facility usage this week; takeup is now down to $4.9B, down $1.3B in the last month and down from the 1-year high of $6.4B set in July which looks to have been a temporary blip higher.
