UK Retail Sales Growth Exceeds Expectations; Budget Deficit Undershoots Target
Despite the high inflation, UK retail sales growth accelerated more than expected in June as good weather boosted food and non-food store sales, the Office for National Statistics reported Friday.
However, survey results from the market research group GfK showed that the consumer confidence weakened for the first time in six months in July.
Separate data from the ONS today showed that the British budget deficit undershoot the government estimate in June. However, the deficit remained the third-highest for the month since records began in 1993.
Retail sales advanced 0.7 percent month-on-month in June, which was faster than the 0.1 percent rise in May. This was also faster than the economists’ forecast of 0.2 percent.
All the main sectors of retail sales, namely food, non-food and non-store retailing expanded in June, except automotive fuel.
Non-food stores sales gained 1.0 percent in June. Department stores and furniture retailers reported that summer sales and increased footfall lifted sales volume. Driven by good weather and promotions, food store sales volume rebounded 0.7 percent.
By contrast, automotive fuel sales dropped 0.3 percent after May’s 1.7 percent increase.
Excluding automotive fuel, retail sales volume registered an increase of 0.8 percent after staying flat in May. Sales were forecast to grow 0.2 percent.
On a yearly basis, retail sales posted a decline of 1.0 percent after a 2.3 percent fall in May. Economists had forecast an annual fall of 1.5 percent.
The sales volume excluding auto fuel decreased 0.9 percent following a 1.9 percent drop in May. The decline was less severe than economists’ forecast for a 1.6 percent decline.
In the second quarter, retail sales volume growth doubled to 0.4 percent from 0.2 percent in the first quarter.
The GfK consumer sentiment index declined to -30 in July from -24 in June.
GfK’s client strategy director Joe Staton said that consumer confidence improved in the first six months of 2023 despite the continuing cost of living crisis, with the double-digit inflation outpacing income growth and rising interest rates affecting homeowners and renters alike.
“Suddenly, this resilience has collapsed”, Staton said.
Capital Economics economist Ashley Webb said although the worst of the falls in real household incomes are in the past, the full drag on activity from higher interest rates has yet to be felt.
The growing drag from higher rates will tip the economy into recession in the second half of this year and generate a 0.5 percent peak-to-trough fall in real consumer spending, the economist reckoned.
Public sector net borrowing excluding public sector banks decreased by GBP 0.4 billion to GBP 18.5 billion in June. Earlier, the Office for Budget Responsibility estimated the deficit to reach GBP 21.1 billion.
The ONS said higher tax receipts as well as a strong fall in debt interest payable compared to last year, were largely offset by increased benefit payments and other costs.
PSNB for the three months to June was GBP 7.5 billion lower than the OBR estimate. The deficit was GBP 54.4 billion.
At the end of June 2023, public sector net debt was GBP 2.59 trillion or provisionally estimated at around 100.8 percent of annual gross domestic product.
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