We know what you are thinking, retail sales are booming and pigs are flying. But numbers are numbers, and they are looking good. The last two days have seen the release of the CBI distributive trades survey, and official data on retail sales from the ONS. The ONS data wasn’t half bad at all. The CBI data was wholly good, but holy Moses, what are we to make of it all?
According to the ONS, retail sales rose 0.3 per cent in November. At face value that might not seem like anything special – although it’s not bad either, but you need to bear in mind that our beloved compiler of statistics revised its figures for October upwards. Now it has retail sales in October rising by 0.7 per cent, instead of 0.5 per cent. So not only were sales in November up on the month before, the month before did exceptionally well. Furthermore, who knows, but don’t be surprised if the ONS revises its figures for November up too.
Mind you, Chris Williamson at Markit wasn’t that impressed. He said: “There is evidence here of early Christmas shopping, with sales of toys, sports goods and jewellery all performing well in November. This is likely to represent careful budget planning by cash-strapped households, who we believe are taking on more debt to buy presents this year.”
But then again, look at the CBI data.
For the period covering the first half of December, 67 per cent of retailers surveyed said that sales were higher than a year ago, while just 11 per cent said they were lower, giving a balance of +56 per cent, the highest figure since April 2002.
So there you have it, it was the best showing of the index in eight years.
So why is this?
At least some of the sales are coming in ahead of next year’s VAT rise. In fact, when the CBI asked retailers about their expectations for next month, the score was much lower with a positive net balance of 35, quite a bit down on last month.
Even so, the fact is that a sizeable proportion of retailers expect sales to improve in January, and that despite the pending hike in VAT.
Ian McCafferty, CBI Chief Economic Adviser, said: “December’s strong survey balance is also likely to capture spending being brought forward, ahead of the January increase in VAT. Indeed, retailers expect sales growth to lose some momentum in the New Year. We remain cautious about prospects for the retail sector further ahead, given ongoing uncertainty over the resilience of consumer spending.”
Vicky Redwood, Senior UK Economist at Capital Economics said: “For now, at least, consumer spending should prevent the overall economic recovery from slowing too sharply in the final quarter of the year.”
Mind you, data from the British Retail Consortium has been less positive. Maybe this is why the BRC’s Director General, Stephen Robertson, was more downbeat He said: “Shaky consumer confidence, with people worried about their jobs and personal finances, means customers are cutting back on non-essential purchases. Our figures show one in four households have no disposable income left at the end of the month, and that’s likely to get worse. Add in the disruption caused to our high streets by the severe winter weather and it all makes for a nail-biting end to the year for retailers.”
The snag of course, which Mr McCafferty, Ms Redwood and Mr Robertson alluded to, is that next year will see household finances stretched. In the year to October, retail price inflation was no less than 2.3 percentage points. Meaning that the average worker became 2.3 per cent worse off during this period. And it is this pressure on household finances that will hit consumer spending hard next year.
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