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UK retailer Next has raised its profit guidance, again, this morning after sales were boosted by pay rises among its customers, and sunny weather this spring.
Next, which sells online, through its catalogue business, and on the high street, now expects pre-tax profits of £875m this year, £30m more than previously expected.
In reality, we were overly cautious about the prospects for sales in the current year, we underestimated the support nominal wage increases, and a robust employment market, would give to our top line.
We also believe the exceptionally warm weather in late May and June served to significantly boost sales of our summer clothing at a critical time (a factor we need to bear in mind when it comes to our forecast for next year).
It was inevitable that price inflation would ease. Even if consumers were to spend the same amount of money on clothing, higher prices would mean the number of garments sold would fall. That is what has happened.
And as a result, the demand for labour, commodities, production and freight has diminished throughout the entire supply chain – from fabric mills through to container ships.