High street scores in sales as football fires summer spending

Official figures today showed retail sales rose 0.7% in June after an even more impressive 0.8% in May.

Household goods stores and department stores performed particularly well as football fans splashed out on TVs, barbecues and other items for the World Cup.

It raised hopes that gross domestic product figures for the second quarter published tomorrow will show growth of 0.6% or more.

Sterling rose more than a cent against the US dollar, up 1.02 cents to $1.5267.

The UK economy grew by 0.3% in the first quarter and 0.4% at the end of 2009 after the deepest recession since the Second World War.

Experts warned it could be downhill from here, however, as the impact of tax rises, spending cuts, and job losses in the public sector hit spending. VAT goes up from 17.5% to 20% in January.

Inflation is also outstripping wage growth and eating into savings.

ING economist James Knightley said: "UK retail sales are proving remarkably resilient.

"It appears the World Cup boosted sales despite falling consumer confidence and Budget uncertainty over taxes and Government spending.

"Nonetheless, with consumer confidence having weakened so much and significant fiscal austerity on its way, this is likely to mark the high point for growth for several quarters."

UK shoppers were drawn in by summer sales last month as prices fell.

Evidence from many retailers suggests, however, that consumers are still reluctant to commit to big-ticket purchases, with B&Q owner Kingfisher reporting weak appetite for kitchens and bathrooms despite selling 5000 World Cup gnomes.

David Kern, chief economist at the British Chambers of Commerce, said: "While the recovery in consumer spending is welcome, there is no room for complacency.

"The economy is still weak, businesses are struggling, and the full impact of the emergency Budget's austerity measures are yet to take effect."

A weak recovery in Europe and the US is also likely to hamper UK growth.

Growth in Europe's services and manufacturing industries unexpectedly accelerated this month, as concern over the eurozone sovereign debt crisis eased and an increase in global trade spurred exports.

But even the most optimistic observers do not expect plain sailing for Europe's economy from here.