British retail sales rebounded much more strongly than expected last month as the country gradually relaxed its coronavirus lockdown, but public borrowing hit a record high and debt passed 100% of economic output.
Sales volumes in May jumped by a record 12.0% after a historic 18.0% slump in April, official data showed.
The rise was at the top end of economists’ forecasts in a Reuters poll but still left sales 13.1% down on a year ago.
Consumer confidence figures for June were the strongest since the lockdown began but remained weak, a separate survey showed.
Bank of England Governor Andrew Bailey said on Thursday the economy appeared to be shrinking a bit less severely in the first half of 2020 than the BoE feared last month. But there was no guarantee of a strong rebound and unemployment would rise.
“May’s recovery in retail sales should not be interpreted as a sign that the economy is embarking on a healthy V-shaped recovery from Covid-19,” Samuel Tombs, an economist at Pantheon Macroeconomics, said.
He said household incomes would be strained when a government support scheme that covers 9 million jobs is wound up in October, before some sectors are likely to be back to normal.
Britain closed non-essential retailers in late March and only a small number such as garden centers reopened in May.
Other stores in England were permitted to reopen on June 15 subject to restrictions.
Sales at non-food stores increased by 24% in May, but were still 42% down on a year earlier, with clothes stores the hardest-hit category, down by more than 60%.
But fuel sales jumped by 49% as people in England got back in their cars.
Online sales rose to a third of all spending, a new record.
The ONS data also laid bare the scale of the hit to Britain’s public finances as a result of the government’s huge increase in spending, much of it on its job retention scheme.
Public sector net borrowing hit £55.2 billion ($68.7 billion) in May — a record high after April’s reading was revised down to £48.5 billion from £62.1 billion.
The May figure was nine times bigger than the deficit in same month last year.
“The best way to restore our public finances to a more sustainable footing is to safely reopen our economy so people can return to work,” finance minister Rishi Sunak said.
A measure of public sector debt edged above 100% of economic output for the first time since 1963, when Britain was still paying off the costs of the Second World War, reflecting the record contraction of the economy in April.
In April and May, borrowing stood at 103.7 billion pounds, £87 billion more than in the same period last year.
Forecasters at the Institute for Fiscal Studies and Citi predicted Britain would still be borrowing significantly in five years’ time.