The ONS reported today that sales volume in the three months March to May rose by 1.8 per cent compared with the previous three months. This follows 1.5 per cent growth in the three months to April.
Apparently the ONS were so surprised that they phoned round retailers to check the figures. The FT reports that the sales data is corroborated by data from the British Retail Consortium which also reported a surge in sales in May.
Everyone is attributing this to the warm weather in May, which always brings shoppers out. But the fact that they had something to spend surprised the City, who assume that everyone is sharing the travails of the financial sector. The truth is that employment is high - some 74.9% of the workforce is in work. Increasing numbers of older people are taking advantage of the government's anti-age discrimination laws, which came into effect in Octonber 2006, and staying on at work, sometimes full-time, sometimes part-time. It's no longer the case that your income has to drop when you age because you are barred from work.
People are also reacting shrewdly and rationally to the hikes in petrol and food. Processed food has shot up in price, and so people are switching to cooking from scratch. Fuel has shot up and people have reacted by driving slower and making fewer trips, to keep their bills neutral. Shops have put up prices, so people buy on the net from someone in HongKong who will absorb the cost of the fuel hikes just to make a sale. The consumer is no longer the dumb helpless creature they were in the 80's when they simply paid what they were charged. And people shouldn't underestimate how complex, resilient and robust the economy has become under Labour.
I'll stick my neck out. We will have solid growth this quarter and the next interest-rate move from the BoE will be up.