Positive news from the UK: Retail sales have not only recovered from the horrible spectacle of the shutdown; They have already surpassed pre-pandemic lockdown levels in the UK.
According to July figures released on Friday by the Office for National Statistics (ONS), retail sales volumes grew 3.6% month-on-month. That may be small compared to the 13.9% growth seen in June and the 12% growth in May, but those were increases from a very low base, and the momentum from July now means volumes are 3% higher than in February, before closing.
The trend echoes that of the United States, where retail spending also surpassed pre-closing levels in July.
Retail sales have now made up all the ground lost during the height of coronavirus restrictions as more stores open to commerce and online sales remain at historically high levels, said the deputy national statistician for economic statistics of the ONS, Jonathan Athow, in a statement.
In fact, online sales seem to be a big factor here, 44% more than at the beginning of the year.
“The flip side of the coin is that sales at many traditional retailers are still well below pre-virus levels and indeed the most recent influx data shows that there has been only a minor improvement, and very steady, in retail traffic from stores reopened in June, “wrote ING developed markets economist James Smith in a note on Friday.
The other aspect to highlight here is that of an uneven retail recovery across all sectors. Sales in the garment sector, which was particularly affected by the shutdown (who cares about new clothes when you’re stuck at home, anyway?), Were 25.7% lower in July than in February. Fuel sales also continue to fall by 11.7%, which corresponds to the decrease in automobile traffic.
ONS’s Athow also noted that food sales “fell back from their recent peaks as people began venturing back into pubs and restaurants.” Clearly, the situation remains volatile.
The UK is not the only European country where consumption is experiencing a strong rebound. As described in a Friday note from Berenberg, sales tax revenue in Germany has “recovered almost like a V.” Retail sales in that country already increased year-on-year during May and June, an average of 5.2%.
An early reading of these indices, which indicate the economic output of these sectors, with a growth threshold score of 50, shows the UK at a high 60.3. This is a record of almost seven years. In Germany, however, the promising July score of 55.3 appears to have dropped back to 53.7 this month. France has also seen its PMI drop significantly this month.
“There were encouraging signs that customer service providers have started to catch up with the rebound seen earlier this summer in the overall economy,” IHS Markit CFO Tim Moore said of the figures from United Kingdom.
Yet employment fears continue to weigh heavily everywhere. In the UK, where supermarket giant Marks & Spencer announced 7,000 job cuts this week, the big crisis is likely to come as the government cuts its wage subsidy plan in the coming months.
And even in Germany, where the government is slated to extend its Kurzarbeit licensing plan for perhaps another two years, IHS associate director Phil Smith noted that “a sustained decline in overall employment … continues to undermine demand. internal “.
Another thing worth noting about the UK situation is that the country’s national debt has exceeded 2 trillion pounds ($ 2.63 trillion) for the first time, as a result of all the government borrowing during the pandemic. . . However, it is likely that this figure would have been even higher had it not been for the tax revenue from that retail recovery better than expected.
