UK data: Some quick thoughts

This week’s economic data has continued to point to a UK economy that is continuing to shake off its post lockdown hangover. The staggered restart of the UK economy appears to be standing it in good stead with lower infection rates than its European counterparts, and this could well be helping with respect to a more steady recovery in some of the broader economic data. July retail sales rose 3.6%, a better than expected rise, marking the first time since the beginning of 2019, we’ve seen three successive months of gains.

These numbers are encouraging, despite the challenges facing UK economy, of which there are many, particularly around sustainability of the furlough. Online retail sales have been a particularly strong area, not altogether surprising given the challenges facing high street retailers in reopening, along with the higher costs, and a reticence on the part of UK shoppers to venture out in the same way as before. The warm weather in July is also likely to have played a part in these July numbers.

On the public finances, borrowing has continued to rise sharply, however by not as much as perhaps most people would have estimated, when the Chancellor first rolled out his stimulus program. In July the UK government borrowed another £25.9bn, on top of an adjusted £28.8bn in June. In each of the last three months the amount of money borrowed has been adjusted lower. In April it was adjusted down by £13.6bn, by £9.8bn in May and by £6bn in June. Make no mistake these are huge sums of money, with UK government debt now above £2trn, but without some of the furlough money that has been repaid by a host of UK companies they could have been much higher. This might give the Chancellor some wriggle room as we head into the autumn.