Tesco share price forecast as UK retail sales slump, inflation jumps

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Tesco (LON: TSCO) share price continued surging this week even after some worrying UK inflation and retail sales numbers. The shares jumped to a high of 275.7p on Thursday, the highest point since May 2022. It has surged by more than 41% from the lowest level in 2022.

UK retail sales slump

There are increasing worries about the UK economy. On Wednesday, as we wrote here, the headline consumer price index remained at a stubbornly high level in March. The headline consumer price index (CPI) remained above 10% in March as food prices jumped. 

Therefore, the cost of living crisis is getting worse every day. It also means that the country’s inflation is substantially higher than that of other countries. For example, data published this week showed that the headline consumer inflation dropped from 8.5% in February to 6.9% in March. In Spain, inflation has dropped to 3.3%.

The rising inflation has led to a sharp decline in retail sales. Data published on Friday showed that the volume of retail sales fell by 0.9% in March, worse than the median estimate of 0.5%. Sales had jumped by 1.1% in the previous month. 

On a year-on-year basis, UK’s retail sales dropped by 3.2% in March. On the other hand, core retail sales dropped by 1.0% from the previous month and by 3.2% on a year-on-year basis. These numbers mean that the retail sector is not doing well as core sales dropped for 11 straight months.

Tesco is highly exposed to the retail sector since it is the biggest British retailer. Therefore, to a large extent, a drop of the broad retail sales means that the company’s business is seeing weaker sales. However, this is being offset by relatively higher prices. 

Also, Tesco is seen as a highly affordable alternative to other British retailers. As a result, while the volume of retail sales is falling, the company is benefiting from its scale and lower prices.

Tesco share price forecast

TSCO chart by TradingView

On the daily chart, we see that the TSCO stock price has been in a strong bullish trend. It jumped to a high of 276p, the highest point since May 19th. The shares have managed to move above the upper side of the ascending channel shown in green. It has also jumped above the 61.8% Fibonacci Retracement level.

Further, Tesco shares have risen above the 50-day and 100-day exponential moving averages. Therefore, because of trend-following, the shares will likely continue rising as buyers target the key resistance point at 300p.

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