Employment at record highs and consumer spending holding up well. Post-Brexit crisis, what post-Brexit crisis?
Following the strong employment data on Wednesday, it was the turn of the high street to fuel unexpected economic optimism yesterday. Retail sales rose 1.4 per cent in July compared with June, impressively outstripping City expectations for a much more modest 0.1 per cent increase.
The rise over the same month a year ago was 5.9 per cent. It comes after retail sales suffered their strongest decline in six months in June, contracting 0.9 per cent from a month earlier.
However, while both sets of data are welcome, it would be unwise to read too much either way into how much they give a true indication of the effect of the Brexit vote in June.
It is possible much better weather in July compared to a damp June drove the better retail sales performance as any post-Brexit rebound. Equally, most of the period covered by the positive employment data was for the run-up to the UK’s European Union referendum rather than after it.
If we parse the numbers a little more, it could be that the sharp fall in value of the pound after the referendum encouraged tourists to splash out more on high-end purchases.
Low inflation and low interest rates may also be sustaining UK domestic consumer confidence. The acid test will be whether the high street shows grace under pressure when inflation is expected to rise later this year and into 2017, particularly if it is accompanied by pressure on earnings amid wider economic uncertainty.
Co-op’s long road to recovery
Co-op Bank’s recovery from near-collapse in those mad days of £1.5 billion balance sheet holes and a drug-taking Methodist chairman a few years ago was never going to be warp-speed. And so it is proving, with continuing substantial headline losses at the lender overshadowing incremental underlying improvement.
Co-op Bank is progressing in a low-key way, with losses narrowing, but an actual profit as a totem of restored business respectability? Probably 2018 at the earliest.
Niall Booker, the Scottish banker brought in to sort the mutual’s mess in 2013, departs at the end of this year with the groundwork for recovery set. But Co-op Bank’s redemption is deferred.