John Redwood’s latest diary discusses the post-Brexit retail sales boom.
In July UK retail sales rose by 5.9% on a year earlier, and were 1.4% up on June. If Brexit was going to have an impact on consumer confidence it would have been in the five weeks immediately following the vote, when a proportion of Remain voters were very unhappy and shocked by the result. Instead people have gone out and bought more clothes, DIY and household goods. Many have also been to spend more in hotels, restaurants and bars. These are all the kinds of purchases you make when you are not unduly worried about your future financial position, as they are discretionary. It’s not all tourists, as it takes time for people to book and come after a fall in the currency.
Employment hit record levels by the end of June. The uncertainties of the campaign and the vote did not interrupt new hirings. The UK economy added 172,000 additional jobs in the second quarter of the year. Employment hit a new all time high at 74.5% of the working age population. In July, after the vote, the claimant count fell again, showing that job creation continued. Unemployment fell by 8,600 in the first full post vote month.
Recent results from companies bear out this generally positive picture. Lookers reported good continuing sales of cars. Housebuilders report decent levels of interest in new properties. Kingfisher’s trading results for the 13 weeks to end July, including five weeks post vote, saw sales growth of 7.2% on a like for like basis (UK and Ireland) in stark contrast to its large French business where sales were down 3.2% over the same time period.
Some people remind us that construction figures have been weak in the first half of the year. This is true. However, when you look at the make up of the figures you see that private sector housebuilding showed good growth, and private sector commercial a little growth. There was a steep fall in public sector housebuilding and a fall in general public sector work. So was the wider public sector trying to make a point by holding back work? Or did the Treasury hold back money, inducing bad news? It is certainly wrong to deduce from the overall decline that it was a drop off in private sector confidence owing to Brexit.
I wonder for how long will the Remain commentators carry on ascribing whatever happens in the economy to Brexit? There are many more influences on the UK economy than this vote. I do not for one moment ascribe the big increase in retail sales to the vote. As they made so much fuss about how there would be an immediate and dramatic loss of confidence causing a short term recession, it seems entirely fair to scrutinise the short term post Brexit figures. So far they show we who ridiculed the official forecasts of a recession and house price collapse on a Leave vote have had the best of the argument.
You can read the original blog here.