Retail sales are again down in May eclipsing the surge in sales in April with a 1.1% gain followed by a sobering 1.4% reduction in May. The net effect will be for retailers to again dust down the SALE banners which is good news for consumers but will only serve to bring forward purchases at lower values that will leave a hole in future sales projections.
The cost of food and energy continues to drive inflation that is keeping the economy in positive growth territory.
The gap between inflation and salary rises will continue to impact on consumer spending and Q3 figures will prompt action on base rates that will be headline grabbing but marginal in quantum (I predict only a quarter point gain by the end of the year).
I believe that the Bank of England will tread carefully as they try and balance inflationary pressures versus the negative impact of a slowdown in the housing market. The threat of mortgage arrears on those stretched by the lack of low deposit mortgage products will also be a consideration.
I am hearing the term “speed bump” entering the vocabulary of some economists to describe the possibility of a blip in economic growth but whatever term becomes the vogue, the UK economy remains perilously balanced and a gentle breeze either way of the line could have long term ramifications.