By Ian McConnell

Retail sales in Great Britain rose for a fourth straight month in August, with the Office for National Statistics flagging contrasting fortunes for online retailers and clothing stores amid the coronavirus pandemic as it published the figures.

The strong sales figures reinforced economists’ expectations of a consumer-fuelled rebound in gross domestic product in the third quarter.

However, the EY ITEM Club think-tank, while saying the retail sales figures supported its expectation of a 15 per cent rebound in UK GDP in the third quarter, expressed caution over the degree to which consumer spending could be sustained given fears over jobs and a surge in unemployment.

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The ONS, publishing the seasonally adjusted data, said yesterday that UK retail sales volumes rose 0.8 per cent month-on-month in August. This was slightly ahead of the 0.7% rise forecast by economists.

Sales volumes in August were up 4% on their “pre-pandemic level” in February, the ONS noted.

It added: “In August, there was a mixed picture within the different store types as non-store retailing volumes were 38.9% above February, while clothing stores were still 15.9% below February’s pre-pandemic levels.”

UK GDP dropped by a record 20.4% quarter-on-quarter in the three months to June, as economic activity plunged amid the lockdown implemented in late March to slow the spread of coronavirus. This followed a 2.2% decline in the first three months of the year, and confirmed the UK was in a deep recession.

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Howard Archer, chief economic adviser to the EY ITEM Club, said: “Consumer spending is clearly headed for a substantial rebound in the third quarter after contracting a record the second quarter. The full opening up of the retail sector in June has released pent-up demand, while the opening up of the hospitality sector and other consumer services from early July is further fuelling consumer spending. Spending on meals also got a significant lift in August from the Chancellor’s Eat Out to Help Out scheme.”

However, he added: “There is considerable uncertainty as to just how willing and able consumers will be to spend beyond the third quarter. Indeed, persistent consumer caution is seen as a significant risk that could limit the UK recovery.

“The fundamentals for consumers have taken a clear downturn as a result of Covid-19, and they are likely to remain under pressure in the near term at least. Many people have already lost their jobs despite the supportive government measures – as was highlighted by employment falling by 695,000 over April to August according to pay-as-you-earn real-time information – while others will be concerned that they may still end up losing their job once the furlough scheme ends in October. There is also a likelihood that unemployment will rise markedly once the furlough scheme ends.”