Retail sales: Why there's no call for optimism after June's mini-boom

Sales have only just clawed their way back to where they were at the beginning of the year and with real incomes falling the consumer can no longer be expected to prop up the economy

Shoppers were out on the High Street in June, but the mini boom isn't sustainable (Daniel Lynch)

A rebound or a blip?

Retail sales are closely watched, not least because the UK consumer has been propping up the economy for some time.

Are there grounds for optimism, then, in the figures showing a better than expected 0.6 per cent rise in June, erasing the declines recorded during a dismal May?

It would certainly seem that way, as a narrative of shoppers tempted back out on to the high street to buy clothes, and shoes, amid the steamy weather took hold.

However, as is often the case with economic data, a deeper delve into the figures reveals a different, and less positive, story.

Such a weather driven boost as was recorded in June cannot be sustained. Some economists actually argued that if everything was really fine and dandy it should have been even better still. When you consider that it was the fifth hottest June since 1910, you can see why they might have a point.

But with month by month figures inevitably being volatile, what do the longer term trends tell us?

Again, there’s a reassuring tone to the headline numbers, at least for politicians hoping that the consumer will put off the day of reckoning that their cack handed approach to Brexit shows worrying signs of serving up.

Retail sales rose by 1.5 per cent in the three months to the end of June, wiping out the 1.4 per cent decline over the first three months of 2017.

That, however, only brings them back to where they were at the beginning of the year and without that unsustainable boost from the June weather, they would still be lagging.

The real story is not one of a bumper June getting things back on track. It is one of retail sales flat-lining through the first half of the year. It’s a better picture than the one painted during the first three months of 2017. But it’s still nothing to get excited about.

Economists expect sales to remain similarly subdued for the rest of the year, and that’s a forecast they’ll probably get right when you consider that wages are running behind price rises, and Brexit is starting to scare the life out of everyone outside of the four cabinet clowns (David Davis, Boris Johnson, Liam Fox and Theresa May) charged with delivering it.

If there’s any benefit to be had from that train wreck it might be this: consumers have for too long spent too much and borrowed too much (via credit cards and the like) to do so. A little more caution on their part, a little more prudent management of household budgets, would be a welcome development.

However, that does mean the economy is going to have to find something else to keep it ticking over. Oh dear.