Taylor on Travel

Is Britain heading for recession? The retail figures for May confounded all expectations, showing the biggest jump in high-street sales for 20 years - surely a smack in the teeth to prophets of economic doom and reassurance the holiday industry can expect a good summer.

The 3.5% rise in month-on-month sales appears so out of kilter with predictions that it has been suggested the figures are wrong - that the Office for National Statistics miscalculated the seasonal weighting. After all, monthly sales figures usually rise or fall by fractions of percentage points.

But are the stats so strange? The figures reflect the volume of sales across retailing. What were people buying? Asda reported selling 250,000 bikinis at £3 each. Both it and B&Q recorded heavy sales of barbecues. Summer dresses and sandals sold well, as did flatscreen TVs ahead of the European football championship.

Was it the sun what done it?

Other figures are revealing. John Lewis reported the value, rather than the volume, of sales up by just 1% in May - and inflation will be a factor in that. Food retailer Sainsbury's registered virtually no growth despite food costing more.

The British Retail Consortium attributed the sales growth to discounts and promotions, and reported reluctance among consumers to buy more expensive items. The ONS figures nonetheless show a 7% rise in the total value of sales in May - although that is an annual rate not month on month.

So what does this tell us?

There was a binge in May when the sun came out. People spent primarily on staying at home. They largely avoided major purchases. Retailers continue to discount and most are pessimistic about the outlook.

Separately, the consumer price index - the least reliable guide to inflation - hit 3.3% last month. The Retail Price Index, a better guide, hit 4.3%. Food, energy and transport prices are rising by double that.

So the value of sales is rising mainly due to inflation - meaning the pressure on discretionary spending can only increase.

Elsewhere, a survey by financial services firm NS&I backed up industry research suggesting people view their holidays as sacrosanct - to the extent that one third begin thinking about their next trip while away on the last one.

However, NS&I also found one in five fail to consider their cash situation when booking, three out of five overspend while away and one in four return home to financial problems as a result. What happens when the penny drops with the over-spenders, especially with credit now tight?

A lag between the onset of an economic downturn and its reflection in the level of holiday bookings is to be expected. It has happened in the past.

My guess is this summer will prove a fair-to-good one for the travel industry. Next year may not.