Key events
“Sales boosted by sunny weather, but that may be as bright as it gets” – that’s the verdict from Ashley Webb, UK economist at Capital Economics.
The further increase in retail sales volumes in June suggests the recent resilience in economic activity hasn’t yet faded. But our view that interest rates will rise further, from 5% now to a peak of 5.50%, suggest that it’s too soon to conclude that the rebound in retail sales will be sustained and that the economy will avoid a recession…
Looking ahead, the GfK measure of consumer confidence fell for the first time since January from -24 in June to -30 in July…
With the full drag on activity from higher interest rates yet to be felt, we still think the economy will tip into recession in the second half of this year and real consumer spending will fall by 0.5% from its peak to its trough.
Introduction: Hot weather helps lift retail sales; UK government borrowing falls
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
We’ve woken up to news that retail sales across Britain rose more strongly than expected in June, boosted by warm weather and supermarket promotions.
Sales volumes climbed 0.7% compared with May, , according to the Office for National Statistics, exceeding economists’ expectations of a 0.2% monthly gain.
Food sales bounced back with 0.7% growth following a 0.4% drop in May, with some supermarkets saying that the good weather and promotions helped sales.
Sales were strong at most retailers with the exception of garden centres, clothes shops and petrol retailers. Department stores and furniture retailers also had a good month amid summer sales and higher footfall.
ONS chief economist Grant Fitzner said:
Retail sales grew strongly, with food sales bouncing back from the effects of the extra Bank Holiday, partly helped by good weather, and department stores and furniture shops also having a strong month.
However, these were partially offset by falls in fuel, garden centres and clothes shops.
Separate official figures showed that the UK government borrowed £18.5bn last month, £400m less than a year earlier but the third-highest June borrowing since monthly records began in 1993. Higher tax receipts and a substantial fall in debt interest payable compared with June 2022 were largely offset by increased benefit payments and other costs.
Public sector net borrowing (excluding public sector banks) was £18.5 billion.
This is £0.4 billion less than in June 2022 and the third-highest June borrowing since monthly records began in 1993.
➡️ https://t.co/KpXBo6WdEW pic.twitter.com/UiFf36nbyW
— Office for National Statistics (ONS) (@ONS) July 21, 2023
Public sector debt excluding public sector banks was £2,596.2 billion at the end of June 2023, provisionally estimated at around 100.8% of the UK’s annual gross domestic product, continuing at levels last seen in the early 1960s. pic.twitter.com/G1AI48o5lf
— Office for National Statistics (ONS) (@ONS) July 21, 2023
