Retail sales rise is respite before the storm, warns consultant

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Despite the rise in UK retail sales in June, Emmanuel Hembert, principal at consultants, AT Kearney, fears stormy waters ahead

“In May we described a bloodbath on the high street, yet the UK retail figures in June have shown a slight recovery up 0.8% in May. 

“Like other spikes earlier this year, we believe it is mainly circumstantial because retailers have launched the summer sales earlier than usual,” said Hembert.  

“However the fundamentals still remain unfavourable. Food has seen a reduction of 4.2% in volume compared to June last year as inflation continues to hit the consumer (+3.7% in June) and real income is falling (-2.7% year on year in March).

“At an international level a far bigger issue is at stake,” Hembert claims.

“The two largest global economies, the US and the EU, are each stuck in a political stalemate that has the potential to lead to a global credit crisis in the next few weeks,” he said.

“In the US, the republicans and the government have so far failed to agree on a plan to reduce the deficit, which could lead to the payment default of the world most powerful economy in early August. 

“In Europe, political leaders are failing to agree on a way to bailout Greece and avoid a contagion that has now started to reach large economies such as Italy. 

“Any unfavourable outcome of these parallel crises could lead to a global meltdown of greater consequence than Lehman’s collapse in 2008. The UK consumer will not be immune from this storm.”