26 June 2026: ‘Burnham bounce’ slashes Reform’s lead as Labour surges by 6%

UK retail sales weakened further in June, with volumes falling at a sharper pace and sales performing below seasonal norms to the greatest extent in more than two years, according to the latest CBI Distributive Trades Survey.

The survey found that retailers considered sales for the time of year to be poor in June, with the weighted balance worsening to -40% from -35% in May.

That marked the weakest reading since January 2024.

Retailers expect conditions to remain subdued in July, though sales are projected to fall short of seasonal norms by a slightly smaller margin, with a balance of -35%.

The CBI said retail sales volumes fell at a sharper rate in the year to June, with the weighted balance falling to -54% from -46% in May.

The weak retail reading followed a downbeat set of business surveys from S&P Global.

While those surveys do not cover retail, they are closely watched as an early indicator of broader economic growth.

Martin Sartorius, Lead Economist at the CBI, said retailers had endured a weak start to the summer.

Retailers reported a gloomy start to the summer, with sales disappointing relative to seasonal norms to the greatest extent in over two years, amid depressed consumer sentiment and rising cost pressures.

A sharp year-on-year fall in retail sales was mirrored across the broader distribution sector, with wholesalers and motor traders reporting firm sales declines.

The heat waves that the UK experienced in the past few Summers are likely to become a permanent fixture and should be considered an integral part of the Bank of England’s inflation and monetary policy.

Climate-related risks are no longer peripheral to inflation and macroeconomic stability, a member of the Bank of England's Monetary Policy Committee has warned.

Swati Dhingra said recent energy price spikes and weather-related events have exposed the vulnerability of economies not only to geopolitical shocks but also to broader climate and energy systems.

Speaking at the World Resources Institute earlier this week, as the UK endured its warmest June day on record, with Somerset reaching 36.4 degrees Celsius, Dhingra said climate-related inflationary pressures are challenging because they directly burden households with higher food and energy prices and are becoming more frequent and severe.

According to Dhingra, dependence on geopolitically exposed fossil fuels, the physical impacts of extreme weather events disrupting supply chains, especially in agriculture, and the green transition are all contributing to inflationary pressures.

"Fossil fuel dependence, physical climate shocks and transition policy are no longer peripheral risks for inflation," she warned.

While the government is responsible for delivering the green transition, Central Banks are charged with maintaining price stability, which creates trade-offs.

Historically, energy shocks have directly contributed to bouts of high inflation, including three-quarters of the inflationary pressure in the 2022 to 2023 period, she said. It is for central bankers to ensure price shocks do not become "embedded in broader inflation dynamics through expectations, wages, and pricing behaviour".

Spikes in global agricultural commodity prices, such as cereals, oils and sugar, have long coincided with major weather shocks and El Niño cycles, Dhingra noted.

But extreme temperatures, droughts, floods and other weather-related disruptions, which are becoming more frequent and severe, directly affect agricultural supply, particularly in developing economies.

Labour has narrowed Reform's poll lead, as a "Burnham bounce" has seen the party's popularity surge by 6 percent.

The Find Out Now poll put Reform at 24%, down three percentage points from last week, with Labour now hot on the heels of Nigel Farage's party at 21%.

Zack Polanski's party lost two points, bringing it to 15%, suggesting Burnham's popularity might be drawing left-wing voters away from the Greens.

Similarly, the Liberal Democrats dropped one point to 12%.

The Conservatives remain unchanged at 18%.

It is the first poll to suggest the Labour Party could enjoy a popularity boost following Andy Burnham's succession to No. 10.

Reform has led more than 300 consecutive opinion polls and has maintained a commanding average lead since February 2025.

The pound recovered a little yesterday as the dollar’s recent gains ran out of steam. It reached a high of 1.3219 and closed at 1.3193.

The U.S. economy has shown solid growth momentum, and inflation was expected to reach the Federal Reserve's 2% target by the end of next year, the International Monetary Fund reported yesterday.

IMF spokeswoman Julie Kozack told a regular news briefing that the Fed last week appropriately decided to hold its key policy interest rate, and welcomed the new chair, Kevin Warsh, for his strong commitment to delivering price stability.

"Growth momentum in ​the U.S. economy has been solid," Kozack told reporters, citing the latest economic data, which revised first-quarter GDP growth to a ​2.1% annualised rate, up from the previously reported 1.6% ​.

She noted that government consumption had bounced back, investment in the U.S. was strong, and labour productivity remained high, making the US something of an outlier globally.

Inflation remained above the Fed's target, ⁠but was expected to ease, she said.

"Because of this dynamic, we ​think the Fed appropriately decided to ​keep ⁠the policy rate on hold. Any further policy actions by the Fed will need to proceed ⁠with ​caution, and they would need ​to be carefully calibrated to the incoming data," she added.

The Personal Consumption Expenditures (PCE) price index reached a seasonally adjusted 4.1% annual rate in May, the highest since April 2023, according to a U.S. Commerce Department report released yesterday.

The PCE rose 0.4% monthly, 0.1% below market expectations.

The core PCE price index, excluding food and energy, rose 3.4% year on year and 0.3% month on month, the highest since October 2023.

Given the increase in energy prices tied to the Middle East conflict, it was no surprise that energy was the largest source of price gains, with related goods and service prices up 4% in May, while housing costs rose 0.3% and financial services and insurance jumped 1.2%.

The Federal Reserve uses the PCE price index as a primary indicator of inflation and the core PCE as a better measure of long-run inflation trends. The rise in these indicators has reinforced the central bank's recent tough talk on inflation.

The report came just more than a week after Fed chairman Kevin Warsh stressed the importance of price stability.

Not only has the Iran War driven up energy costs for Americans, but higher prices for many goods and services, not all related to oil, are erasing desperately needed wage gains.

Federal Reserve Bank of Chicago President Austan Goolsbee has seen enough.

He said he remains concerned about inflation and questioned whether all the factors driving prices up are temporary.

"We've been dealing with an inflation problem that's well above the target and has been going the wrong way," Goolsbee said recently in an interview on American Public Media's Marketplace radio programme.

With the labour market stable, he is focused on determining whether too-high inflation will persist or recede as the effects of high tariffs fade and the conflict in the Middle East is resolved, Reuters reported.

What makes Goolsbee's comments notable is less their content than the fact that he expressed them.

Fed Chair Kevin Warsh has begun a massive reform of the U.S. Central Bank's communications, and one key tenet of the overhaul is to significantly curb speeches and statements from his fellow Fed officials and Regional Presidents.

The dollar index suffered its first reversal since its recent surge as traders began to consider that it may be entering an “overbought” situation.

It fell to a low of 101.31 and closed at 101.46.

ECB Executive Board Member Piero Cipollone said that changes in the payments industry meant banks faced that risk regardless of the digital euro, which he argued would actually help them.

The digitalisation of payments has reduced the role of cash, the only form of Central Bank money, prompting the ECB to pursue a digital currency to compete with private forms of money.

Speaking to Italy's banking association ABI, Cipollone said the digital euro would "preserve the central position of banks in payments".

"Banks could lose their role in payments not just because of stablecoins but also due to other private solutions," he said.

Banks risked not only losing revenues but, more importantly, access to their customers' payment data, which they need to offer more profitable services.

The ECB also wants to protect European payment schemes, such as Italy's Bancomat card scheme and Spain's Bizum peer-to-peer scheme, Cipollone said.

National schemes will be able to issue cards that work across the euro zone by using the digital euro infrastructure under "co-badging" agreements.

These functions will be available long before the digital euro's planned launch in the second half of 2029.

To avoid cannibalising domestic schemes, the digital euro system will be structured so it remains cheaper for shop owners to use those networks, Cipollone said.

"The cap on the fee that merchants will pay on the digital euro network will be lower than what the international payments network, normally the costliest, charges, but higher than what the domestic payments scheme, normally the cheapest, charges," he said.

Only eight of the 21 Eurozone members have a national payments scheme, with the others currently relying entirely on international networks.

"The digital euro will effectively favour domestic payment schemes," Cipollone added.

Fraying transatlantic ties have led the ECB to classify the fact that more than three-quarters of European transactions are processed through international payment schemes such as Visa or Mastercard as a strategic risk.

Visa has been the sole provider of card payments at the Olympics since 1986 and will remain so until 2032.

Business confidence in France edged up only marginally in June, rising by a single point to 94, still well below its long-term average.

Most firms responded to the survey before the announcement of a Middle East peace agreement, but in an environment where global energy prices had already begun to ease.

Overall, the underlying details paint a rather concerning picture for France’s economic outlook. The modest improvement is largely attributable to retail, where sentiment is slightly less negative than in May, with the sub-index rising from 89 to 90, though still significantly below its long-term average of 100.

Meanwhile, business sentiment in services remains particularly weak, at its lowest since 2021, with deeply negative expectations across all sub-sectors, both household- and business-oriented. Industry, which had been the only real engine of French growth, is also showing signs of softening, with sentiment declining across sectors and returning to its average level. Firms, in particular, report a more pessimistic assessment of past production.

Perhaps most worrying is the continued deterioration in the labour market outlook. In June, the employment climate indicator fell by a further three points to its lowest level since 2013 (excluding the pandemic period). This suggests that job creation will remain insufficient in the coming months, with unemployment likely to continue rising, potentially approaching 8.5% by the end of 2026.

The Euro gained a little relief from its recent falls yesterday, rallying to a high of 1.1388 but fell back to close at 1.1368.

Have a great day!