Retail sales took an unexpected downward turn in May in the United Kingdom -- for first time in three months. Cautious banks appear to be the problem, as their rationing of credit is impeding broader economic recovery. Retail sales fell 0.6% from the previous month, while economists had predicted a 0.3% change in the other direction.
Year-over-year, retail sales were off 1.6%. Sales for the year are down 1.1%, the greatest decline since score-keeping began in 1988. Of course, there's plenty of fodder for rationalizing the results. The annual change was affected by an "unusually large" retail sales estimate for May 2008. Clothing, textile, and footwear retailers and department stores led the plunge, with nonfood store sales off 1.4%, compared to a 0.3% increase in food retail sales.
Access to cash remains a problem, even though some signs in the market have inspired confidence. The flow of loan funds to borrowers in the UK is at a nine-year low, which is why the recovery is expected to be uneven. The outlook has improved, but there's still a long way to go. Mortgage lending declined by 2% from April 2009 to May 2009.
Until the banks loosen up the purse strings, the return to normalcy will be choppy at best. I imagine there are a handful of people in the UK regretting those Icelandic bank deposits right now ...
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