Analysts at Goldman Sachs said in a note Monday that they see space for UK consumer-exposed sectors to pick up.
While their performance has lagged year-to-date, the bank highlights three reasons these sectors, and Retailers in particular, can outperform.
Firstly, Goldman Sachs believes an improvement in expectations on future financial conditions and consumer confidence, supported by rising house prices in May, should support Retailers. They note that both factors have risen steadily since late 2022.
In addition, the bank says wage growth, although decelerated, remains elevated, and the near-term outlook looks strong. "As prices fall and wages stay relatively sticky, this should boost Consumer Discretionary," write analysts at Goldman Sachs.
Finally, the analysts state that after recent Pound strengthening, Retailers have space to rise somewhat, although, going forward they don't see the GBP rate as a large driver as the bank's FX strategists are flat in their 12 month forecast at 1.28.
"Two likely reasons Retailers have lagged so far is because the savings rate and inflation remain elevated," adds Goldman Sachs. "Our equity analysts have previously noted this as a headwind for the sector but expect the household available cash to improve through the year."
Within their Retail coverage, analysts at Goldman Sachs are Buy-rated on B&M, JD (NASDAQ:JD) Sports and Marks & Spencer (OTC:MAKSY) on the Consumer Discretionary side, and on Tesco (OTC:TSCDY) and Sainsbury's on the Consumer Staples side.