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Could rise in retail sales signal a stronger UK economy?

Better-than-forecasted sales figures have helped to raise hopes that the UK’s recession may not be as deep as first feared.

According to figures from the Office for National Statistics (ONS), sales volumes in July rose by 0.3 per cent and were up 2.8 per cent from a year earlier.

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ONS also revised June’s monthly sales figure, increasing it to 0.8 per cent from 0.1 per cent.

Analysts are now suggesting that the 0.7 per cent shrink in economy in the second quarter that had be predicted, could be somewhat pessimistic.

p>Rises in factory output and the construction sector, coupled with falls in unemployment, could mean that the national income as measured by gross domestic product (GDP) isn’t shrinking as quickly as was initially estimated.

Figures released this week showed that the number of people out of work fell by 46,000 in the three months to June – an eight per cent drop in the unemployment rate.

Capital Economics’ Vicky Redwood remarked: “The fall in sales in Q2 [second quarter] overall was revised from 0.7 to 0.3 per cent, adding to other evidence suggesting that the initial estimate of GDP will be revised up in next week’s second estimate.

“What’s more, sales should maintain this recent positive momentum in the near term as the boost from the Olympics comes through.”

Director general at the British Retail Consortium (BRC) Stephen Robertson isn’t quite as optimistic: “July was no golden month for retailers, despite the build-up to the Olympics. The sale of non-food goods held up better than food, but both measures were weaker than in June.

“We’ll need to see August’s figures for the full picture. But with disposable incomes still under pressure and with inflation sneaking back up, underlying conditions remain challenging for the sector.”

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