British retail sales bounce back almost to pre-lockdown levels
Shoppers take a break in front of a department store in London on Thursday. Associated Press
Sales volumes in June leapt by 13.9% from May, above all forecasts in a Reuters poll of economists.
A 70% surge in clothing and footwear sales reversed much of their slump in recent months, though the sector remains one of the worst hit, with spending 35% below pre-pandemic levels.
Overall sales volumes rose to within 0.6% of February’s level. Excluding fuel sales, hit by less commuting and other travel, volumes were 2.4% higher than in February.
Household goods stores also saw strong sales in June especially for furniture and DIY materials. Home improvement retailer Kingfisher this week forecast first-half underlying profit ahead of last year after exceptionally strong demand.
Retail sales represent only about a third of consumer spending, however, and other figures suggest people remain cautious about returning to places like bars and restaurants.
“The surge in retail sales volumes in June is not a sign that households’ overall spending also is recovering fully and rapidly,” said Samuel Tombs of Pantheon Macroeconomics.
Britain’s economy shrank by more than a quarter in March and April and only recovered slightly in May when there was a limited relaxation of the lockdown imposed on March 23.
The Bank of England’s (BoE) chief economist Andy Haldane says payments data has suggested a rapid, V-shaped recovery though many of his colleagues are doubtful about a sustained recovery.
The British Retail Consortium said earlier this month that spending among its members - typically large high-street chains - was 3.4% higher this June than last year.
Friday’s figures showed that retail sales slumped by a record 9.5% in the second quarter compared to the first.
Compared with June 2019, sales were down 1.6%, a smaller fall than 6.4% seen in the Reuters poll.
Online spending, which soared at the start of the lockdown, fell as a share of overall spending as shoppers in England were able to return to stores from June 15 onwards. But at 31.8%, it remained much higher than February’s 20%.
Consumer sentiment is still well below its level before the coronavirus struck Britain and cafes and restaurants have reported subdued demand since they reopened on July 4.
More than 45,000 people with COVID-19 have died in Britain, Europe’s highest death toll. The BoE policymaker Jonathan Haskel said on Thursday that persistent health worries as well as a jump in unemployment risked halting the recovery.
Meanwhile, Britain and the European Union clashed on Thursday over the chances of securing a free trade agreement, with Brussels deeming it “unlikely” but London holding out hope one could be reached in September.
Since Britain left the bloc in January, talks on the trade agreement and other future ties have all but stalled, with each side accusing the other of failing to compromise before a transition period runs out at the end of this year.
Those accusations grew louder after the latest round, with the EU’s negotiator Michel Barnier saying London had shown no willingness to break the deadlock and his British counterpart David Frost describing the bloc’s proposals as failing to meet the government’s demand to be treated as an independent country.
But both sides agreed on one thing: there had been no movement on the main stumbling blocks to a deal on fair competition guarantees - the so-called level playing field - or on fisheries.
Without a deal to govern future trade flows, some companies fear costly disruption and confusion at the border from next year, which would hit at a time when many are already struggling with the impact of the coronavirus crisis.
“By its current refusal to commit to conditions of open and fair competition and to a balanced agreement on fisheries, the UK makes a trade agreement - at this point - unlikely,” Barnier told a news conference after the face to face talks in London.
“The time for answers is quickly running out,” he said. “If we do not reach an agreement on our future partnership, there will be more friction.”
“Frost was equally blunt, saying “considerable gaps” remained but he added: “Despite all the difficulties, on the basis of the work we have done in July, my assessment is that agreement can still be reached in September, and that we should continue to negotiate with this aim in mind.”
Senior EU officials say they only expect possible breakthroughs by the end of August or in September, but some have also expressed concerns that British Prime Minister Boris Johnson might go for a no-deal split.
Reuters
