Retail bounce ‘unlikely to be sustained’ warn economists

By KRISTY DORSEY
Published on 28/06/2012 00:00

ECONOMISTS yesterday cast doubt over consumers’ ability to drag the UK out of recession despite the release of surprisingly robust retail spending figures for the first two weeks of June.

The strong jump-start recorded in the CBI’s latest distributive trades survey came as shoppers splashed out on Jubilee celebrations. The spending boost could raise hopes that economic growth will edge back into positive territory for the second quarter of the year.

But despite the acceleration in spending – up at the fastest pace since December 2010 – shopkeepers noted that sales remained subdued for the time of year. Amid weak consumer confidence and economic uncertainty, few experts believe the gains will be sustained.

Nearly six out of ten retailers reported a rise in sales, versus 17 per cent who said trade was slower than in the same period a year earlier. The overall balance of +42 doubled May’s reading and confounded expectations for a sharp slowdown to +10.

The survey comes on top of official data from the Office for National Statistics which showed a 1.4 per cent rise in sales volume in May. The majority of that growth was driven by discounting.

Chris Williamson, chief economist at financial data provider Markit, said the combination of official and survey data indicated that retail sales may have risen by at least 1 per cent in the second quarter – possibly enough to lift the flagging economy out of the technical recession it slipped back into in the first three months of the year.

Howard Archer, chief economist with IHS Global Insight, said hopes would be lifted that the economy could avoid further contraction in the second quarter. He also noted a slight easing in the squeeze on purchasing power amid reduced petrol prices and lower food price inflation.

But he added: “However, it seems unrealistic to expect a sustained, major pick-up in consumer spending.”

The CBI said grocers recorded their fastest sales growth since February 2010, while shoe and leather retailers had their strongest period on record. Across the board, retailers expect growth to slow in July to a balance of +32.