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* UK retail sales beat forecasts in July, above year-ago
levels
* Public debt rises past 2 trillion pounds but borrowing
slows
* Economists warn rebound in consumer demand may fade
(Adds detail on public finances)
By David Milliken and William Schomberg
LONDON, Aug 20 (Reuters) - British retail sales surged past
their pre-coronavirus level in July, the first full month that
shops selling non-essential goods were open since the country
went into lockdown in March.
Separate government borrowing data showed public debt rose
above 2 trillion pounds ($2.65 trillion) in July for the first
time and reached 100.5% of gross domestic product - its highest
as a share of GDP since 1961.
The unexpectedly robust retail sales figures showed the
strength of consumer demand even as other parts of the economy
are struggling to recover from recent hefty losses.
Retail sales volumes rose by 3.6% from June - above all
forecasts in a Reuters poll of economists - and were 1.4% higher
than in July 2019, the Office for National Statistics said.
That represented a sharp recovery from double-digit falls in
April and May.
Compared with February, before Britain was broadly affected
by the pandemic, sales were 3.0% higher.
"This uptick in retail consumption may help ease concerns
over the fragility of the UK economy - but not for long,"
Alistair McQueen, head of savings and retirement at Aviva, said.
Britain's retail sector has enjoyed a much faster bounce
back than almost all other parts of the economy hit by the
coronavirus lockdown. But there have been contrasting
experiences for different types of retailer.
Supermarkets and other food shops have benefited as British
people eat at home more. Online sales have boomed, and household
goods stores have seen strong demand.
Other areas have suffered, with clothing and footwear sales
still 25% down on a year ago.
Companies such as Marks & Spencer, Boots <WBA.O<,
John Lewis, Dixons Carphone and WH Smith
have announced plans for thousands of job cuts.
Economists fear the broad retail recovery could prove
temporary.
"July's retail sales likely will represent this year's
peak," said Samuel Tombs of consultancy Pantheon Macroeconomics.
Restaurants and bars began to reopen in July, giving people
more options for their spending.
Furthermore, unemployment is forecast to rise sharply once a
government job support scheme stops at the end of October.
Emergency state spending and a shortfall in tax revenue look
set to increase borrowing this year to a record 298 billion
pounds, the government's budget forecasters say.
Friday's figures showed borrowing between April and July hit
150.5 billion pounds, almost seven times higher than in the same
period in 2019.
Borrowing in July alone was the lowest since the start of
the pandemic at 26.7 billion pounds. July is a month when tax
receipts typically boost the public finances.
Finance minister Rishi Sunak has indicated that some taxes
will need to rise over the medium term.
"Today's figures are a stark reminder that we must return
our public finances to a sustainable footing over time, which
will require taking difficult decisions," he said.
($1 = 0.7555 pounds)
(Reporting by David Milliken; Editing by Alistair Smout, Kate
Holton and Christina Fincher)
