LONDON (AP) -- Retail sales in Britain rose by 2.5 percent annually in June while auto production jumped by 28.6 percent, according to reports released Thursday, although experts warned that the economic outlook remains fragile.
While the data shows consumer demand is rising, government spending cuts could hurt it in the future, analysts say.
The Office for National Statistics said the value of retail sales was 0.1 percent higher than in May. The volume of sales was 1.3 percent higher than a year earlier, a gain of 0.7 percent from May.
Sales by mainly nonfood stores were 3.7 percent higher by value than a year go, while food stores registered a 1.7 percent gain, the agency said.
"That could be as good as it gets, though," said Vicky Redwood, senior U.K. economist at Capital Economics.
"The fiscal squeeze is set to knock some 8 percent off household incomes over the next few years. And we see little scope for households to borrow more/save less to see them through the squeeze."
Analysts at Barclays Capital cautioned that monthly retail sales figures are notoriously volatile, and they said the first half of the year has been disappointing.
Retail sales excluding gas were down 0.4 percent in the first half compared to the second half of 2009, which can't be explained solely by consumers getting their spending in ahead of a hike in sales tax on Jan. 1, said Simon Hayes and Varun Babha.
"The softening in retail spending has coincided with a stalling in consumer confidence, and is likely to reflect increased pessimism on the part of households about the economic outlook, probably linked to concerns about government budget cuts," Hayes and Babha wrote.
Even with the strong report on auto production in June, data from the Society of Motor Manufacturers and Traders indicated that the recovery was slowing. The monthly gain was well below the 55 percent increase in car production in the first half of the year, compared to a year earlier.
Commercial vehicle production was up 24.9 percent for the month and just under 50 percent higher for the first half.
"The coming months remain uncertain and sustaining economic recovery in major markets around the world remains the industry's top priority," said Paul Everitt, chief executive of the motor society.
