Danni Hewson, AJ Bell head of financial analysis, comments on the latest retail sales figures and public sector finances.
She said: “There’s nothing quite like a long stretch of really glorious weather to improve the mood of the British public and that’s exactly what we got at the start of June (though under today’s grey skies we might be forgiven for wondering if we dreamed it).
“Consumers rushed to update their summer wardrobes, finding department stores had handily reached for the red pen to soothe any guilt of spending on fripperies when budgets are uncomfortably tight.
“Homes too were given a brush up as garden furniture was pulled out of sheds and the old BBQ was wiped clean of spider debris.
“That day’s meal planning went out the window as uncomfortably warm nights pushed us to linger outside with a cold glass of something and a slightly charred burger.
“If May’s bank holidays gave us the opportunity to get out and about, sharing long weekends with friends and family, June was the month to enjoy being at home and our spending habits reflected this with fuel sales falling back and food sales ticking up.
“Rising prices have become the norm and people are using any means possible to make their money go further. But they are still spending even if consumer confidence is being sorely tested as the cost-of-living crisis morphs into a cost-of-interest crisis.
“Government spending has been similarly tested as it’s had to dig between the sofa cushions to find cash to cover the costs of energy subsidies and uprated benefit payments, all at a time when the interest on existing debt is going through the roof.
“Increased tax take and slightly less blistering interest payments than this time last year might have softened the impact a little and there are plenty of commentators highlighting the potential wiggle room in these numbers which are a little less bleak than had been forecast.
“The chancellor might be sticking to the ‘fiscally responsible’ script but realistically any government looking at today’s bi-election results would be drawing up plans to sweeten the pot for voters in the months ahead of a general election.
“And with the energy price cap now rendering the government energy price guarantee obsolete this is an improving picture. But the public are savvy, they recognise that higher tax receipts demonstrates that they are paying more. Tax threshold policies coupled with inflation fuelled pay rises mean more and more people are seeing more and more of their hard-earned cash disappear every month. And since most people are currently watching every single penny, this will sting and it will be remembered.”
