Rise in UK retail sales figures prompt hopes of economic recovery

Britain's shoppers showed some resilience in May, official figures revealed yesterday.

Retail sales volumes, excluding fuel, were up 0.9 per cent on the previous month and 3 per cent higher than the same month in 2011 according to the Office for National Statistics. This followed a deep, 1 per cent monthly fall in retail volumes in April.

David Kern, the chief economist at the British Chambers of Commerce, said: "This increase in sales proves that excessive pessimism over the state of the UK economy is unjustified. Falling inflation is clearly playing a role in reviving consumer demand."

There were also encouraging signs yesterday from the CBI's latest monthly industrial trends survey, which showed a bounce back in confidence among manufacturers this month.

The survey showed 27 per cent of firms expecting an increase in their volume of output over the next three months, against 19 per cent expecting it to fall. The +7 per cent positive reading was up on the -3 per cent figure reading registered in May.

However, some economists warned that the two positive indicators could be a flash in the pan.

Nida Ali of the Ernst and Young Item club said the improvement in retail sales was misleading, since the figures for April had been artificially depressed by the wet weather.

"Overall, the boost in retail sales is likely to be temporary," she said.

There were clear signs of heavy discounting in department stores. Sales volumes were up 11.3 per cent compared with May 2011, the biggest rise in more than a decade, while prices fell 2 per cent over the same period.

Samuel Tombs of Capital Economics also sounded a note of scepticism over the picture painted by the manufacturing survey.

He said: "The CBI's survey is often volatile and has been too upbeat compared to official figures in the recent past. So, until we have further evidence, we are reluctant to conclude that the downturn in the manufacturing sector has ceased."

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