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21 July 2011

Positive retail sales but underlying growth still weak

• June retail sales up 0.7% on the month, up 0.4% on the year

Commenting on retail sales figures for June, published today by the Office for National Statistics, David Kern, Chief Economist at the British Chambers of Commerce, said:         

“The June retail sales figures are better than expected but they come after disappointing outcomes in April and May. The value of sales in June rose by only 0.3%, much less than the volume of sales, indicating renewed pressure on retailers’ margins. While the figures suggest that fears of a decline in GDP in the second quarter are too pessimistic, they also point to weak overall growth in the economy. We predict that the second quarter GDP figure due to be published next week will show modest growth of 0.3%, less than the OBR predicted, but still positive.

“The figures do not justify the deep pessimism about the economy expressed by some people, nor the calls for a change in strategy. However, given the pressures facing businesses and consumers, the economy faces risks as the government’s tough austerity programme continues to bite. It would be a mistake to raise interest rates in the future and much more must be done to sustain growth and empower businesses to create jobs, export and invest. UK productivity has fallen significantly since 2008 and recouping these losses must be a key policy priority.”