Robust retail sales figures boost hopes of UK economic recovery

Stronger-than-expected retail sales in July raised hopes that Britain's double-dip recession might turn out to be shallower than initially expected.

The Office for National Statistics (ONS) reported yesterday that retail sales volumes rose by 0.3 per cent over the month. City analysts had expected a small contraction.

The ONS also revised up its volume figures for June from a rise of 0.1 per cent to 0.8 per cent.

Last month the ONS estimated that UK GDP contracted by 0.7 cent in the second quarter of 2012, suggesting that Britain was in a steepening downturn.

But analysts said the latest retail output, combined with a better-than-expected construction and maufactuing performance in June, might see the quarter's figures revised up to a contraction of just 0.5 per cent in the ONS's second estimate next week.

Further, the Bank of England has estimated that the extra bank holiday in June artificially suppressed second-quarter growth by 0.5 per cent, meaning the economy was actually flat in the second quarter.

This view was reinforced by comments from Martin Weale, a member of the Bank's Monetary Policy Committee (MPC), yesterday, who said the UK economy was stagnating rather than contracting.

"For quite a long period now, we have had slight upward movement, and slight downward movement. Rather than describe it as a double-dip recession, I would describe it as a sustained period of stagnation," he said.

The MPC has expressed the hope that falling inflation will lessen the squeeze on real household incomes, and encourage more spending.

The ONS reported yesterday that the shop price deflator – a measure of inflation in the retail sector – fell to 0.2 per cent in July, its lowest level since October 2009.

Nevertheless, there remained signs of weakness in the latest retail figures. Excluding petrol sales, volumes were flat on the month and non-food sales fell by 0.5 per cent.

Asda boss backs easing Sunday trading laws

Andy Clarke, the chief executive of Asda, has revealed he is in favour of loosening Sunday trading restrictions, as the UK's second-biggest supermarket posted a slowdown in its second-quarter sales growth.

Ahead of the Olympics and Paralympics, the Government allowed retailers to choose their own opening hours from 22 July to 9 September – instead of a maximum of six hours for shops bigger than 3,000 square feet. Mr Clarke said shoppers had responded positively to the change. He added: "If giving greater flexibility to shopping hours pleases customers, I would support that [extension]."

Asda posted a 0.7 per cent rise in sales over the three months to 30 June, compared with a 2.2 per cent uplift in the first quarter. Despite this, Asda has outperformed Tesco, Morrisons and Sainsbury's over the last 12 weeks, according to Kantar Worldpanel.

James Thompson

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