UK retail sales beat estimates while budget deficit worsens

ecPulse.com

Britons are finally taking advantage of discounted merchandise, where they boosted retail sales. Today, we saw UK retail sales, on an annual basis, climbe to a 17-month high, while government budget deficits continue to be affected from the ongoing recession.

The Office for National Statistics released retail sales for October at 0.4% inline with revision, yet worse than the expected 0.5%; while yearly they rose to 3.4%, higher than the revised prior reading of 2.9% from 2.4% and higher than the estimated reading of 2.9 percent.

Higher retail sales figures came from high sales of textile, clothing and footwear rising to 1.8% from 0.3%; while yearly rose to 4.2% from 0.1% and higher internet sales. Also, ONS stated that Britons are doing early Christmas shopping in fears that postal services might go on strike during December, hence interrupting deliveries.

The improvement in retail sales helped narrow the government budget deficit down, although it still remains widened as the public sector net borrowing continues to mark the worst deficit on the month since 1993, while tax receipts continue to decline for the thirteenth time in a row.

The public sector net borrowing for October showed a narrowed deficit to 11.4 billion pounds from the revised prior deficit of 14.9 billion pounds from 14.8 billion pounds, while it was projected to narrow to 7.0 billion pounds.

By breaking this data into details; we see that value-added taxes rose to 8,012 million pounds from 4,523 million pounds, corporation taxes climbed to 7,193 million pounds from 1,375 million pounds.

Also released were public finances for October at 5.9 billion pounds, narrowing down from the revised previous deficit of 19.3 from 19.4 billion pounds, which is worse than the anticipated deficit of 4.0 billion pounds.

Although spending has been improving lately, especially as we saw higher retail sales, the government’s income still remains pared from the lower tax receipts, because of the fragile job market in the economy, which is reflected in curtailed consumption.

However, the economy’s net debt compared to GDP climbed to 59.2% in October, which is right under the 60% ceiling set by the European Union’s. As a result of the worst recession since WWI; public sector net borrowing in the first half of the fiscal year beginning in April, marked a net of 86.9 billion pounds versus the prior year of 33.9 billion pounds.

Meanwhile, the widened government budget is a major woe the UK economy continues to face, while unemployment rates are already at 7.8% next to the ongoing credit crisis. As long as these obstacles exist in the nation, it will continue to hold back an economic recovery, despite the APF program.

The Bank of England has been using 200 billion pounds towards providing stability in the banking system next to reviving economic growth, this has been improving conditions in the nation; although we should not expect growth this year, especially since the previously mentioned factors are heavily weighing on the economy’s growth.