UK Retail Sales Fall in June, Pound Falls Slightly

The volume of retail sales in the UK decreased by 0.9% from May to June this year, indicating that the threat of ‘Brexit’ reduced the confidence of British consumers, although year on year retail sales hiked by 4.3%, compared to June last year, according to the UK’s Office for National Statistics.

Overall, the amount spent on retail products also decreased by 0.9% in June in contrast to the previous month, and increased by 1.5% compared with June last year, although in the three months leading up to June, sales were boosted by 1.6% from the figures from the previous quarter.

Online sales continued to be a major driver of growth in the industry, increasing by 14.1% in June, compared with the corresponding month last year, and increased by 0.5% compared with May 2016.

Public Sector Debt Rises to 84% of GDP

The net arrears of the UK public sector has now reached 84% of their GDP, the equivalent of £1,620.7 billion, the latest figure represented an increase of £47.6 billion of debt compared with June 2015.

Despite the increase in borrowing, the 84% figure confirms that borrowing is falling in the UK, albeit at a slow pace, as the level of borrowing for the whole of last year was 89.2% to GDP, which was a record high.

During the second quarter of this year, public sector net borrowing, excluding public sector banks, fell by £2.3 billion to £25.6 billion in the current financial year up to June, when compared with the same period in 2015.

The latest central government net cash requirement decreased by £0.9 billion to £24.8 billion in the current financial between April to June 2016, compared with the same period in 2015.

Its is the conventional thought that as monthly data can be volatile, and the most accurate way to assess the UK’s finances is through the cumulative year-to-date borrowing figures, which supply a better indication of the progress of the public finances than the individual months.

As the latest figures are inclusive only up to June 30, it remains uncertain how ‘Brexit’ will effect the public finances in the short to medium future, the outlook is generally pessimistic, particularly from the IMF who revised downwards the UK growth forecasts for this year, trimmed down by two points to 1.7%.

Pound Falls in Data Reaction

The pound has responded negatively to the figures released today, and has lost some of the gains made from the favourable employment numbers that were released yesterday, and steadily climbed up by 1% against the dollar and 1.2% on the euro.
Sterling has now dipped, as the GBP/USD rate is $1.3193, falling from a peak of $1.325 this morning GMT.

New Prime Minister Theresa May has now been in her position for a full week, and met German Chancellor Angela Merkel yesterday, confirming that ‘Brexit’ talks will not begin this year, and insisted that she wished for close economic links with the rest of Europe.

Mrs May has also clarified that there would be strict limits to any further stimulus action, and that even though the government still sought a surplus on the public finances, the target to achieve that during the 2019-20 financial year has now been axed.