There’s been a lot of doom and gloom on the economy lately, so we’re delighted to report two positive snippets of news today. Retail sales jumped 1.1% last month, much more than the City was expecting – suggesting consumer confidence isn’t quite as bad as previously thought. And the ONS reported that the Government ‘only’ borrowed £3.8bn, much less than the same month last year – suggesting the public finances aren’t quite as bad as previously thought. But are these signs of light at the end of the tunnel, or is it just a temporary blip?
Let’s start on the high street: that 1.1% sales jump was nearly three times the 0.4% the City was expecting, and the biggest leap since February. Some of the big winners recently make sense – discount chain Poundland, for example, which said today that it was on the lookout for bigger stores after delivering a 130% hike in annual profits. But what’s surprising is that July’s boost was largely down to a great month for specialist retailers (computer shops, booksellers, jewellers and so on), who saw sales climb more than 6%. Since most of these items fall very much in the ‘discretionary purchases’ category, that goes against the prevailing wisdom – as parroted by pretty much every single retailer – that shoppers are being much more careful with their cash.
There was also good news on the public finances, which are looking slightly less horrendous (though of course it’s all relative). Apparently, July net borrowing fell markedly from last year’s figure of £6.1bn last year, while the deficit for the first four months of the financial year (which smoothes out short-term blips) was also down, from £47.5bn to £44.9bn. Interestingly, the ONS said this was largely due to a big pick-up in (particularly corporation) tax receipts – an encouraging sign for the economy. Then again, it’s only the second time this century that we’ve had to borrow any money in July, so let’s not get too carried away.
And unfortunately, try as we might, we’re finding it hard to get too excited about the July retail figures too. Last month was undoubtedly a good one – but with spending cuts and tax hikes on the horizon, prices still rising faster than wages, and house prices back on the slide, it’s hard to see consumer confidence heading any way but down in the coming months. High street retailers shouldn’t get used to numbers like these.
In today's bulletin:
High street bounces back in July - and borrowing falls
GM outlines big risks in $20bn IPO plan
Women will have to wait 57 years for equal pay
Graduates and school leavers in danger of being left behind?
Bangers and cash: Lincolnshire levies sausage tax