Retail sales were up by 0.4% in real terms in Q1 2013 (vs -0.8% in Q4 2012) which corroborates our view that consumption in Q1 was slightly better at +0,3-0,4% y/y (vs -0.2% in Q4 2012). It is also consistent with accounting based on real disposable income of households. However, such a rebound in consumption carries only statistical flavor since reacceleration is proceeding in a glacial pace, insufficient to bring a turnaround in moods of consumers and firms. As the MPC got stuck in a scenario which did not materialize, ans as economy fails to accelerate and inflation is heading for all-time lows, the only reasonable reaction is to cut rates. We expect this to happen in May already and possibly by 50bps since MPC waited for too long.
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