Title: UK retailers report surprise sales jump after welfare boost

Aug 25, 2022 07:17 AM ET

By: AnalysisWatch

Figures from the Confederation of British Industry (CBI) show that British retailers recorded their best August sales in nine months, thwarting expectations of a decline due to cost-of-living pressures on households.

The CBI's retail sales balance for August jumped to +37 from -4 in July. Reuters polled economists, most of whom were expecting a decline to -7.

Samuel Tombs, an economist at consultancy Pantheon Macroeconomics, said the jump in August sales was likely the result of emergency cost-of-living allowances paid to people on welfare at the end of July as part of a support package announced by former finance minister Rishi Sunak in May.

Low-income households, who had to cut spending sharply in the second quarter, receiving the most support from the government, it is not surprising that retail sales benefited immediately, "Tombs said in a note to clients."

Consumer price inflation hit a 40-year high of 10.1 percent in July and is expected to continue to climb-perhaps as high as 18 percent, according to Citi analysts-as energy prices rise due to Russia's invasion of Ukraine.

Both contenders for the British prime minister's job have promised more help for households. Foreign Secretary Liz Truss said she would prefer to cut taxes, while Sunak said he would focus on targeted support for low-income households.

The CBI survey showed the extent of inflationary pressure that continues to build in the British economy.

The quarterly measure of average selling price inflation rose to its fastest pace since 1985 at +87, up from +77 in May.

Prices are expected to rise at a similar pace in September.

The CBI survey is based on responses from 60 retailers between July 27 and August 12.