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Economic recovery gathers pace

The economic recovery promised by Chancellor Kenneth Clarke gathered steam last month. Alongside another surge in high street spending came signs that the benefits were trickling down into the depressed construction industry.

The growth in retail sales in June was the second-highest it had recorded in two and a half years, boosted by good weather and the housing market, the British Retail Consortium said yesterday. The housing market continued to pick up, too, with the Royal Institute of Chartered Surveyors saying more estate agents were reporting rising prices than at any time since the property boom.

Builders are finally beginning to share the fruits of recovery, according to the Building Employers Confederation. It said construction output increased in the second quarter of the year, the first rise since early 1995.

Retail sales were 7 per cent higher than a year earlier, the BRC reported in its monthly survey of big retailers. This was up from 6.2 per cent in May and around 4 per cent in the first four months of the year, indicating that the improving trend on the high street is being sustained.

Andrew Higginson, chairman of its economic affairs committee, said: "Consumer confidence and willingness to spend has certainly improved, and this is reflected in greater optimism among retailers."

The weather and Euro 96 boosted beer sales. The sunshine helped clothing sales in the first half of June, while footwear sales were the best for months.

The football-mania hit sales of electronic goods, aside from ever-popular personal computers. But anything else related to the housing market - china, curtains, furniture and carpets - sold well.

The survey noted that, apart from May, when official statistics for the value of retail sales fell unexpectedly, its indicator has tended to understate the actual growth of sales by about 1 per cent.

Further evidence of the revival of the housing market was provided by estate agents. A net balance of 30 per cent of agents said prices went up rather than down in the three months to the end of June compared with three months to the end of May, according to the monthly survey by the Royal Institution of Chartered Surveyors.

The highest balance of rising prices since October 1988, it was dominated by London and the South-east. A balance of 78 per cent of estate agents in the region said prices increased, fuelled by an acute shortage of properties for sale.

The national average of homes for sale per agent stands at just 124, the lowest figure since spring 1989.

There were tentative signs that the upturn in housing is bringing relief to hard-pressed builders. The April-June survey of the construction industry reported the first improvement in output since the beginning of 1995, although the rise was modest.

Paul Shepherd, chairman of the Building Employers Confederation, said: "We can at last begin to see some light at the end of a very long, dark tunnel."

He warned, however, that the outlook for employment in the industry was still bleak. "We need a continued regime of low interest rates and inflation levels," he said.

The improvement in output last quarter was due to increases in private housing, industrial and commercial demand, along with non-housing repair and maintenance.