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| Version 0 | Version 1 |
|---|---|
| How the City got it wrong on retail spending | How the City got it wrong on retail spending |
| (about 2 hours later) | |
| The City got it wrong. The shops remained quiet in January despite all the talk of a bounce-back in spending after a downbeat runup to Christmas. Spending went down not up. | The City got it wrong. The shops remained quiet in January despite all the talk of a bounce-back in spending after a downbeat runup to Christmas. Spending went down not up. |
| So why was that? There are three main explanations. The first is that the official figures are wrong, always the first port of call when the experts have egg on their face. | So why was that? There are three main explanations. The first is that the official figures are wrong, always the first port of call when the experts have egg on their face. |
| Survey evidence from the CBI and the British Retail Consortium painted a rather upbeat picture for January, reporting increased footfall and a greater willingness on the part of consumers to part with their cash. Analysts relied heavily on these snapshots for their forecasts, but they are just surveys. | Survey evidence from the CBI and the British Retail Consortium painted a rather upbeat picture for January, reporting increased footfall and a greater willingness on the part of consumers to part with their cash. Analysts relied heavily on these snapshots for their forecasts, but they are just surveys. |
| The official data from the Office from National Statistics has a big sample of 5,000 retailers, and included in all those employing more than 100 people are – crucially – a large number of small retailers, often under-represented in surveys and which have been really feeling the pinch during the recession and its aftermath. | |
| But what about the weather? If we can't blame the number crunchers then surely we can blame the big freeze in the second half of January, which kept eager shoppers away from the high street? Well, yes and no. Yes, to the extent that the ONS reported a big drop in food sales consistent with people living out of the larder rather than going to the supermarket or local convenience store. No, to the extent that the trend in retail sales has been weak for some time. | But what about the weather? If we can't blame the number crunchers then surely we can blame the big freeze in the second half of January, which kept eager shoppers away from the high street? Well, yes and no. Yes, to the extent that the ONS reported a big drop in food sales consistent with people living out of the larder rather than going to the supermarket or local convenience store. No, to the extent that the trend in retail sales has been weak for some time. |
| Retail sales volumes are down quarter on quarter and lower this January than they were in January 2012. Those trends cannot be explained away by a few inches of snow and a week of sub-zero temperatures. | Retail sales volumes are down quarter on quarter and lower this January than they were in January 2012. Those trends cannot be explained away by a few inches of snow and a week of sub-zero temperatures. |
| The best explanation of all, therefore, is the most obvious one: consumers are skint. Real incomes, according to the ONS, are back to 2003 levels, and with petrol prices again rising sharply there is simply less money available for discretionary spending. | The best explanation of all, therefore, is the most obvious one: consumers are skint. Real incomes, according to the ONS, are back to 2003 levels, and with petrol prices again rising sharply there is simply less money available for discretionary spending. |
| But isn't this inconsistent with an improving labour market, which should be leading to an increase in aggregate incomes? Not at all. Rising employment masks two big trends: the increase in part-time work and the willingness of workers to accept cuts in real (inflation-adjusted) pay in order to avoid losing their jobs. | But isn't this inconsistent with an improving labour market, which should be leading to an increase in aggregate incomes? Not at all. Rising employment masks two big trends: the increase in part-time work and the willingness of workers to accept cuts in real (inflation-adjusted) pay in order to avoid losing their jobs. |
| As a result, spending power for millions of Britons is weak and likely to remain so. That's why the ONS is reporting that the proportion of online sales remained above the 10% mark in January. Normally, there is a spike in internet buying in December as consumers load up on CDs, books and clothes for Christmas presents, and then the percentage falls back. This year it has remained high, a sign that Britain has not lost the spending habit but is being forced to shop around for bargains. | As a result, spending power for millions of Britons is weak and likely to remain so. That's why the ONS is reporting that the proportion of online sales remained above the 10% mark in January. Normally, there is a spike in internet buying in December as consumers load up on CDs, books and clothes for Christmas presents, and then the percentage falls back. This year it has remained high, a sign that Britain has not lost the spending habit but is being forced to shop around for bargains. |