World Cup kicks off retail sales

24-08-2006

The effect of the World Cup upon UK residents' wallets was alive and well in May, as government retail figures reveal consumer spending increased again.

Official data from the Office of National Statistics shows that the volume of retail sales increased by one per cent between March and May compared to the previous three months, with consumers collectively spending £4.7 billion per week.

Department stores in particular experienced growth, with sales rising by 3.3 per cent during the same three months compared to the corresponding period in 2005, the most significant increase since February 2001.

Clothing sales also went up, rising by a two-year high of 2.5 per cent as England fans splashed out on football shirts and merchandise.

Meanwhile, food stores and non-food stores increased their sales output by 0.5 per cent and 1.2 per cent respectively.

Commenting on the latest retail figures, Howard Archer, chief UK and European economist at analyst firm Global Insight, predicted that the World Cup boost to spending levels may be short-lived.

"Consumers have clearly livened up recently, after hibernating in the first quarter of the year. Nevertheless, we suspect this could well prove to be a temporary burst of energy from consumers, as significant problems remain regarding their longer-term health," he said.

"Retail sales were relatively healthy in May, as they were significantly boosted by spending on electrical goods, particularly flat-screen TV's, and football-related merchandise ahead of the World Cup," the economist added.

The total volume of sales during the past three months compared to the corresponding period of 2005 increased by 3.2 per cent, a 16-month high.

But Mr Archer maintains that retailers will struggle to continue such increases throughout the summer months.

He commented: "Consumers continue to face a number of major handicaps - including moderate earnings growth, a rising tax burden, soaring utility bills, higher debt levels, pension concerns and rising unemployment.

"These factors are expected to counter the support for spending coming from high employment and the currently healthier housing market," Mr Archer concluded.


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