Retail: Consumers ‘could drive recovery’ as sales bounce

HOPES were boosted yesterday that the consumer can help lift the UK out of recession after special offers and discounts drove a surprise rise in retail sales last month.

Analysts believe that the stronger-than-expected spending on the high street, together with upward revisions to second-quarter construction and manufacturing figures, mean the double-dip recession may be not be as deep as feared.

The upbeat data raises the chances that the originally reported 0.7 per cent decline in economic output in the second quarter will be revised up. It also hints at a possible return to modest growth in the current quarter, particularly as the period will include the full impact from the London Olympics.

Yesterday’s official numbers, which only covered the first two days of the Games, showed that sales volumes rose 0.3 per cent in July to give an annual increase of 2.8 per cent. That compares with economists’ forecasts for a monthly fall of 0.1 per cent.

Strong fuel sales were one of the key drivers of growth as the big supermarket chains put on special offers to boost trade.

The Office for National Statistics (ONS) also revised sales growth in June to 0.8 per cent from a previously reported increase of just 0.1 per cent after additional information was received from retailers.

David Kern, chief economist at the British Chambers of Commerce, said the annual rise of almost 3 per cent supported the business group’s belief that “some of the pessimism surrounding the recent performance of the UK economy is unwarranted”.

He added: “This figure provides hope that in the third quarter of the year we will see some recovery in economic activity.”

The UK economy has been shrinking since late 2011, according to official data, prompting the Bank of England to embark on a fresh round of money printing early last month, while the government is trying to get credit flowing to businesses and households.

Scotiabank economist Alan Clarke highlighted the halving in consumer price inflation from last September’s peak of over 5 per cent and an apparent recovery in the jobs market.

“Inflation has slumped, there’s 335,000 more people in work and they’re spending it,” he said.

Vicky Redwood, UK economist at Capital Economics, said August’s retail sales figures should benefit from the feel-good factor around Team GB’s success but expressed fears that the momentum may ease later in the year.

The British Retail Consortium, whose own figures last week pointed to a “lacklustre” July, noted that the ONS data showed sales growth had been weaker last month than in June, despite the opening days of the Olympics