David Prosser: Never take the sales figures at face value

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Outlook Happy days? The combination of better than expected retail sales data and a sharp rise in mortgage advances was enough to give sterling a sharp lift yesterday. After a couple of weeks of more gloomy economic indicators, both sets of data were much more upbeat. Should we take heart from these numbers, which both suggest consumer confidence may be picking up? In truth, sadly, probably not.

Let's look at those retail sales first. One point to make is that the Office for National Statistics has produced a number of upbeat monthly assessments of the market in the past year, many of which have been questioned by retailers themselves not sharing that experience. The latest data may not be reliable either.

Even if you take the figures at face value, June's 1.2 per cent sales uplift was almost entirely cancelled out by May's 0.9 per cent fall. An average 0.15 per cent rise over two months is hardly the stuff of which recoveries are made, especially when you take into account heavy discounting and fantastic weather in June, which no doubt artificially buoyed retailers.

Nor is the picture reassuring in the mortgage market. We did see a rise in advances in June, as you'd expect as we entered the moving season, and there was a 5 per cent uplift compared with June 2008. But lending for house purchases remains at half the level of 2006 and crucially, say analysts, well below what is needed for a sustained housing market recovery.

It would be odd, in fact, if either set of data was any more positive, given the sustained rises in unemployment during the first half of the year. The National Institute of Economic and Social Research expects joblessness to go on rising for two more years. If it is right, expect to see more patchy data on the key consumer sector.