Economic recovery has come too late for Sunak

Today’s retail sales figures, showing that volumes increased by 2.9 per cent in May after a fall of 1.8 per cent in April, provide yet another sign of economic recovery. But there must be a horrible and growing realisation in Downing Street that it is all coming too late – and that it will be an incoming Labour government which benefits from economic recovery.

As for the sales figures themselves, they are not as dramatic as they might at first appear. Rather, the plunge in sales in April, followed by the sharp rise in May, shows how volatile these statistics are. The Office of National Statistics (ONS) seasonally-adjusts them, yet these figures also depend on how the dates fall: some months have four weekends and others five, which must make something of a difference. Looking at the wider picture, sales volumes increased by 1.0 per cent in the three months to May, but were still 0.2 per cent down on the same period in 2023. Textile and clothing sales did particularly well in April, rising by nearly 10 per cent, while household goods sales were flat.

Nevertheless, it is hard not to argue that – over the population as a whole – the cost-of-living crisis is essentially over, at least for now. Household incomes are now rising sharply in real terms. Inflation is back to the Bank of England’s target. Energy prices will fall again next month. Interest rates have remained higher for longer than was expected at the beginning of the year but are still likely to be falling by August or September.

But will the Conservatives see any benefit from this? It seems not. Rishi Sunak, in his new-found leisure this summer, may ponder whether he would have done better to wait until autumn to call the election, on the basis that signs of an improving economy may be better by then. But the country’s mind appears to be largely made up: the Conservatives have had too long in office and need to be booted out. Not even an economic boom would change that, any more than it helped John Major in 1997. Then, the economy was doing rather well, but the Tories still went down to an historic defeat.

In other words, it’s not the economy, stupid. It was Bill Clinton’s campaign team in 1992 who came up with the slogan which is the inverse of the above (for workers at their HQ; it was not for public consumption). Clinton benefitted from an economic recovery which arrived just in time. Starmer probably will too. The US had suffered a sharp downturn in 1992 which miraculously seemed to lift in January 1993, just in time for Clinton’s inauguration. It underlines the role of luck in politics.

Rishi Sunak is doomed to end up looking a hopeless PM, who took the Tories from an 80-seat Conservative majority in 2019 to a cataclysm five years’ later. Yet a more sober analysis by historians will surely conclude that he was doomed from the beginning. Hardly any democratic western government survived the fallout from Covid, the economic turmoil which followed that, and the invasion of Ukraine. Fate, though, seems to be determining that his successor as PM will walk into a rapidly-improving economic picture.