MNI DATA IMPACT: UK July Retail Sales Pass Pre-Covid Levels

UK retail activity regained pre-pandemic levels in July, lifted by fuel and computer sales, while public sector borrowing topped 100% of GDP, despite heavy revisions to June numbers, data released Friday by the Office for National Statistics showed.

Retail sales increased by 3.6% between June and July, outpacing analysts' forecasts of a 2.0% rise, increasing by 1.4% over the same period of last year. Sales jumped by 6.1% on a rolling three-month basis, the first increase since Q3 2019.

Petrol sales fueled much of the July strength, as predicted by the MNI Reality Check, accelerating by 26.2%. However, motor fuel sales remain 11.7% below pre-pandemic levels, with July road traffic volume 17% below early-February levels, according to an ONS official.

Public sector borrowing hit GBP26.669 billion in July, bringing borrowing to 100.5% of GDP for the first time since the fiscal year ending in March 1961. The ONS adopted the mid-July forecast by the Office for Budget Responsibility in compiling the most-recent data. Borrowing for the first four months of the fiscal year soared to GBP150.5 billion, compared to GBP56.633 billion in the whole of the 2019/20 fiscal year.

June borrowing was revised sharply lower, to GBP29.507 billion from the GBP35.526 billion reported last month, largely due to higher-than-forecast government receipts. Value-aded-tax receipts rose by GBP2.4 billion over the earlier estimate, while National Insurance contributions increased by GBP1.9 billion and PAYE receipts rose by GBP900 million.

OUTLAYS

On the outlay side, government furlough payments were revised lower by GBP900 million in June, although government purchases of goods and services rose by GBP700 million compared with the initial report.

The June revision extends a trend of heavy downward restatements of borrowing between initial reports (based partially on estimates) and later iterations (based on actual data). Borrowing in May hit GBP45.6 billion, down from the initially-reported GBP55.2 billion, while April borrowing totalled GBP48.7 billion, compared to the GBP62.1 reported in May.

The OBR will issue revisions to its borrowing projections later on Friday to reflect the costs of the the Treasury's Eat Out to Help Out scheme and the reduction in stamp duty announced last month.

SALES

Sales at "Other Stores" jumped by 19.6%, powered by computers and telecoms equipment (+58.0% m/m) and books, newspapers and periodicals, but remained 0.8% below year-ago levels. Food stores sales declined by 3.1%, but still rose by an annual rate of 2.7%. Clothing and footwear sales were nearly 26% below February levels, despite an 11.9% increase between June and July.

Internet sales declined by 7.0% between June and July, the biggest fall since August of 2012, taking online commerce down to 28.9% of total sales from the record-high of 33.4% touched in May.