Retail sales bounce back in June

Retail sales bounced back only modestly in June from May's steep slump, fuelling concerns over the recovery and highlighting the uphill struggle for the government as it aims erase a record budget deficit.

The Office for National Statistics (ONS) said sales volumes rose 0.7 per cent last month, recovering only half the previous month's drop. Analysts had forecast an increase of 0.5 percent on the month.

The ONS also said public sector net borrowing held steady at £12bn last month, as expected.

In the first three months of the 2011/2012 fiscal year, the government's preferred measure – public sector net borrowing excluding financial sector interventions – was also little changed from the same period a year ago at £39.2bn.

The coalition government of Conservatives and Liberal Democrats is one year into a five-year plan to largely eliminate the country's budget deficit, which totalled more than 10 per cent of GDP before they came into office in May 2010.

But the sluggish recovery of the economy has cast doubts over the government's ability to meet its goals.

Britons are suffering the worst squeeze in income for 30 years on the back of soaring food and fuel prices, higher taxes and slow wage rises, and they cut back on non-essential spending.

A survey by lender Nationwide showed that consumers turned gloomier again in June. The Nationwide consumer confidence index reversed some of May's gains, dipping to 51, and remains well below its long-term average.

A survey from the CBI employers' organisation has also shown that retailers are turning more pessimistic about the outlook.

The Bank of England has warned that growth is likely to remain weak over the summer after a slew of disappointing news raised fears that the economy shrank in the second quarter.