UK [B]Retail Sales[/B] are set to add 0.4% in July, the second consecutive month in positive territory. The annual pace of growth is expected to register at 2.7%, a bit lower than the previous month’s 2.9% result but certainly better than the -2.0% drop registered in May, the largest in 17 years. The metric has seen atypical volatility over recent months as rising unemployment levels grappled with rebounding asset values and government stimulus for dominance over consumer sentiment. On balance, we see the downside scenario as more plausible: fiscal support is inherently limited with the UK budget deficit already set to average over 12% of GDP though 2010, threatening the country’s sovereign credit rating; meanwhile, global equity valuations are looking increasingly overdone having finished last month at the highest level relative to earnings since 2003. Unemployment growth, meanwhile, looks far more permanent, with a survey of economists conducted by Bloomberg expecting a steady rise to put the jobless rate just shy of 9% by the end of next year. Clearly, this points to the likelihood of a down trend in retail activity for the time being.