Retail sales see slowest growth since November 2013 while borrowing falls short of OBR's forecast - EY ITEM Club comments

21 August 2014

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Martin Beck, senior economic advisor to the EY ITEM Club, comments on today’s retails sales and public finances figures:

“This is only a modest improvement in sales growth following a weak performance in May and June."

“July saw the slowest annual growth in retail sales since November 2013. There also appear to be deeper disinflationary forces at work, driven in part by the ongoing supermarket price war. July was the first time since records began that the amount spent in food stores fell on an annual basis."

“Looking forward, further rises in employment and downward pressure on shop prices should support growth in retail spending. But the prospect of only a modest pick-up in earnings is likely to dampen the rate of expansion."

Public finances

“The picture for the fiscal year to date shows borrowing running 5.1% ahead of the £35.2bn seen in the same period in 2013-14. This falls well short of the OBR’s forecast of a 10% reduction for the fiscal year as a whole."

“July’s public finances data delivered an improvement on the deficit recorded in the same month last year. However, with July being a seasonally strong month for corporation tax revenues, a surplus is generally the norm."

“Overall, the process of deficit reduction remains a slow one. The Chancellor will no doubt be hoping for a sharp pick-up in the pace of improvement if he is to deliver any sweeteners before next May’s General Election.”