British retail sales last month rebounded much more strongly than expected as the country gradually relaxed its COVID-19 lockdown, but public borrowing hit a record high and debt passed 100 percent of economic output.
Sales volumes last month jumped by a record 12 percent after a historic 18 percent slump in April, official data showed.
The rise was at the top end of economists’ forecasts in a Reuters poll, but still left sales 13.1 percent down from a year earlier.
Photo: EPA-EFE
Consumer confidence figures for last month were the strongest since the lockdown began, but remained weak, a separate survey showed.
Bank of England Governor Andrew Bailey on Thursday said the economy appeared to be shrinking a bit less severely in the first half of the year than the bank feared last month, but there was no guarantee of a strong rebound and unemployment would rise.
“May’s recovery in retail sales should not be interpreted as a sign that the economy is embarking on a healthy V-shaped recovery from COVID-19,” Pantheon Macroeconomics economist Samuel Tombs said.
He said that household incomes would be strained when a government support scheme that covers 9 million jobs is wound up in October, before some sectors are likely to be back to normal.
Britain closed nonessential retailers in late March and only a small number such as garden centers reopened last month.
Other stores in England were permitted to reopen on Monday subject to restrictions.
Sales at non-food stores last month increased by 24 percent, but were still 42 percent down on a year earlier, with clothes stores the hardest-hit category, down by more than 60 percent.
Fuel sales jumped by 49 percent as people in England got back in their vehicles.
Online sales rose to a third of all spending, a new record.
The Office for National Statistics data also laid bare the scale of the hit to Britain’s public finances as a result of the government’s huge increase in spending, much of it on its job retention scheme.
Public sector net borrowing last month hit ￡55.2 billion (US$68.54 billion) — a record high after April’s reading was revised down to ￡48.5 billion from ￡62.1 billion.
Last month’s figure was nine times bigger than the deficit in the same month last year.
“The best way to restore our public finances to a more sustainable footing is to safely reopen our economy so people can return to work,” British Chancellor of the Exchequer Rishi Sunak said.
A measure of public sector debt edged above 100 percent of economic output for the first time since 1963, when Britain was still paying off the costs of World War II, reflecting the record contraction of the economy in April.
In April and last month, borrowing stood at ￡103.7 billion, ￡87 billion more than in the same period last year.
Forecasters at the Institute for Fiscal Studies and Citi predicted Britain would still be borrowing significantly in five years’ time.
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