Retail spending in the U.K rose 0.4% in July, which was in-line with expectations, while the annual rate of consumption increased 3.3% from the previous year to top market forecasts for a 2.7% rise. The breakdown of the report showed demands for household goods jumped 4.5% after contracting 1.0% in June, while discretionary spending of food slipped 1.0% from the previous month, with sales of clothing and footwear slipping 0.4%. The rebound in household spending encourages an enhanced outlook for the U.K. as policymakers anticipate economic activity to improve throughout the second-half of the year however, fading demands for employment paired with tightening credit conditions is likely to drag on the real economy as the outlook for future growth remains weak. At the same time, the budget deficit surged to GBP 8.0B during the same period, which is the highest since recordkeeping began in 1993, and the downturn in labor market paired with lower tax revenues could hamper the prospects for future growth as the Bank of England sees a risk for a slower recovery.
