I was out and about on two occasions this evening, the first time on foot, the second on my push bike.

It was frankly eerie. At the end of the evening rush hour, walking along a side road about 200 meters from a main artery on the other side of some buildings, the usual familiar background ‘hiss’ of tyres on tarmac wasn’t present. Certainly there was traffic but nowhere near as much as usual.

Later when I took to the road by bicycle, I was even more surprised as the general absense of heavy traffic. I found my self travelling along one stretch of a normally busy A road for a minute or two where I was the only vehicle moving. I also encountered a higher than normal number of other cyclists and a few walkers. Don’t get me wrong, I’m no tree hugger and indeed I own a car but it hasn’t been off the drive in days; the fuel is just too expensive.

Fuel in the UK is now £1.17/litre for petrol or £1.30/litre for diesel (The equivalent of US $8.52 / US Gallon)

There was still a small contingent of lunatics on the road it seemed though. First there was the original ‘boy racers’ in barried-up shopping trollies doing their level best to anhiallate themselves and others and the inevitable Evo VII crowd burning more fuel per inch than anyone else on the road. Clearly the credit crunch hasn’t quite caught up with these demographics yet.

One thing is for sure, the UK’s economy can’t survive if all the motorists are priced off the roads.

American motorists are crossing the Mexican border in order to obtain cheaper, subsidised fuel for their cars.

The price of petrol [gasoline] in Mexico is around $1.40 a US gallon cheaper than in the USA. This has seen Americans living close to the border crossing over despite the threat of drugs related border violence in order to fill up their cars.

Some motorists waiting to fill up in the daytime heat in Tijuana even came to fisticuffs with others waiting for fuel. The demand for fuel from American motorists is so great that supplies in Tijuana are running short. The drug cartel killings which scared away much of the American tourism in the area do little to deter an American with his mind set on getting his fix of gasoline.

China has ended their subsidy of road fuels sending the pump-price up 18% overnight.

The Times Online says the surprise decision had Chinese motorists flocking to fuel stations to fill up but many retailers refused to serve them until the price increase came into effect at midnight. Some thought that the fuel subsidies would remain in place until after this years Beijing Olympics to avoid any thought of social unrest.

Also noted is that the Chinese are to expect electricity prices to be increasing soon.

UK gas prices and by proxy, electricity prices could rise by 40% by this winter.

The rising wholesale cost of gas has been cited as the leading cause for the price inflation. The increase would see a approximately £400 increase in the average UK energy bill.

Electricity prices are likely to be on the increase as well because the government of the 1990s chose to provide Britain’s electricity through gas powered generation instead of nuclear and the current government gave us 11 years of almost total inaction on base-load energy generation before finally making a decision in the last 6 months to build new nuclear power stations.

Unfortunately, new nuclear power stations look to be years away still and although the UK is not supplied with Russian gas, Gazprom’s levering of gas prices affects the entire EU market and has a knock-on effect for the UK.

Retail sales for the UK grew by 3.5% in May according to figures published by the ONS. That’s would be 8.1% annualised; nothing to be sniffed at. This runs contrary to the general picture of a slowing economy with tightening credit and anecdotal evidence of the same.

Many explanations could be given for the increase in retail spending. Many have suggested that downturns tend to have ‘one last hurrah’ rather like the ‘dead cat bounce’ of financial markets. There is also the possibility that heavy discounting has prompted greater sales numbers. Personally, I’ve seen something of the opposite; lowering retail sales, quieter high streets and less traffic on the roads. Others I’ve spoken to seem to be in agreement on this.

So, wherever the 3.5% extra retails sales were happening, apparently it wasn’t near me.

The ‘analysts’ quoted in today’s news stories point out that the Bank of England is more likely than ever to raise interest rates in an attempt to curb UK inflation which would curtail retail spending in their view. I’d counter that point with the fact that at least bank mortgage rates have been decoupled from the base-rate since about November 2007 so this should have less of an immediate effect for those indebted while preserving some of the buying power of those with savings.

Update: I just caught on VHForex that the last time there was such a big unexpected spike in retail sales (3.2%) it was March 1991, just before the UK fell into recession.

I have an association with a fairly busy retail ecommerce site in the UK and in the last few weeks I’ve noticed a very significant drop-off in the number of Polish ’sounding’ names given by customers placing orders. The British, Middle Eastern and East Asian sounding names are still there but the once familiar Polish or former Eastern Block names have all but gone.

Certainly, this is not a scientific method as many British families inherited Polish surnames after World War II but is this an indicator that Polish immigrants are leaving the UK? It could, of course, be the case that they are still here but they are not buying as part of a larger economic down turn. However, I suspect any economic downturn would see Polish workers leaving to take advantage of the now increasing power of their home economy.

I would therefore be concerned that disappearing ex eastern-bloc workforce could be a major pointer to the wider health of the UK economy.