UK cannot sustain 'Wongaland' economy, says expert
Summer weather boosted UK retail figures but use of payday loans to fund spending will fuel more debt
UK retail sales grew by 1.1 per cent as shoppers stocked up on shorts and sun cream during the warmest July for seven years. However, a leading economist has warned that the summer bounce is an unsustainable "Alice in Wongaland" recovery, as shoppers have been funding their summer spending through payday loans.
The Office for National Statistics said spending in July was strong across a range of sectors, including food, alcohol and clothing, spurred on by Britain's heatwave. Overall sales were 3 per cent higher than in the same month last year – the strongest annual rise since the start of 2011.
Chris Williamson, chief economist of data provider Markit, said sales in the three months to July showed the largest quarterly rise for almost 10 years.
Ann Pettifor, who foretold some of the events of the credit crunch in her 2006 book, The Coming First World Debt Crisis, said that despite these strong figures Britain's economic expansion is superficial as incomes are falling in real terms.
According to The Guardian, Pettifor also pointed out that Britain's economy was lacking proper investment and still needs to be rebalanced. "There's nothing seriously underpinning this recovery," she said, "and that's why it's Alice in Wongaland, the confidence fairy is out there."
Pettifor said that as prices continue to rise more rapidly than average wages, consumers have had to fund their spending with high interest payday loans or by dipping into their savings over the summer.
She joined the growing ranks of experts who warn that George Osborne's Help to Buy scheme will create a housing bubble. The government has been hoping the scheme's boost to the housing market, coupled with renewed consumer confidence, will strengthen the economic recovery in the second half of the year.
David Kern, chief economist at the British Chambers of Commerce, said that although it would be better to see Britain's growth coming from investment, "it is better to rely initially on domestic demand than to have no growth at all." ·