UK Budget Deficit At Record High; Retail Sales Rebound

The UK budget deficit reached a record high in May and government debt exceeded 100 percent of GDP for the first time since 1963 due to public health measures and economic stimulus adopted by the government amid coronavirus pandemic, official data showed Friday.

Another data showed a sharp rebound in retail sales driven by non-food store sales in May.

Public sector net borrowing excluding public sector banks, totaled GBP 55.2 billion, roughly nine times or GBP 49.6 billion more than in May 2019, the Office for National Statistics reported. This was the highest borrowing in any month on record began in 1993.

PSNB for April was revised down by GBP 13.6 billion to GBP 48.5 billion largely due to stronger than previously estimated tax receipts and National Insurance contributions. The ONS said estimates are subject to greater than usual uncertainty.

The ONS observed that the covid-19 pandemic continues to have a significant impact on the UK public sector finances.

At the end of May, public sector net debt excluding banks was 100.9 percent of gross domestic product, the first time that debt as a percentage of GDP has exceeded 100 percent since the financial year ending March 1963.

Debt at the end of May was GBP 1,950.1 billion, an increase of GBP 173.2 billion or 20.5 percentage points from last year, the largest annual increase in debt as a percentage of GDP on record.

Central government receipts fell by 28.4 percent, while government expenditure grew 49.8 percent.

Another report from ONS showed that retail sales volume increased at a pace of 12 percent on month, in contrast to an 18 percent decrease in April.

Sales were forecast to climb 5.7 percent. However, this was still down by 13.1 percent on February before the impact of the pandemic.

Similarly, sales volume excluding auto fuel, advanced 10.2 percent versus a 15 percent fall a month ago and economists’ forecast of 4.5 percent.

Non-food stores provided the largest positive contribution to the monthly growth in May, aided by a strong increase of 42.0 percent in household goods stores.

Retail sales including auto fuel, declined 13.1 percent on year, following a 22.7 percent decrease in April. This was slower than the 17.1 percent decrease economists’ had forecast.

Excluding auto fuel, retail sales dropped a slower pace of 9.8 percent after declining 18.5 percent in the previous month. Economists had expected an annual fall of 14.4 percent.

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