Retail seems to be bucking the all predictions – but how long will it last?
by Jeremy Priestley
Managing Partner of The P&A Partnership and
Managing Director of P&A Receivables Services plc
Recent retail figures suggest that consumers continue to defy all predictions by the economists – sales volumes are up on previous months and significantly up on this time last year. I am told that house prices are still rising and the stock market seems to be in much better shape.
So are we in a recession or was the past 18 months just a dream? Clearly it wasn’t for the bankers.
The trouble is that retail sales only account for about a third of our overall spending and much more goes on mortgage and rent costs, utility bills, transport, leisure, healthcare and so on.
It is in these other areas that spending has been very weak but which seldom hit the headlines because of the focus on retail sales.
So why have retails sales been more buoyant and will the trend continue well into 2010?
There is a view that consumers are
- economising on non retail items where prices are rising and spending more retail goods where prices are falling
- bringing forward purchases that would normally be made in 2010 to enjoy the modest VAT reduction
- continuing to enjoy the leisure experience of regular shopping – a quick visit to Meadowhall or Fargate suggests that this is so
- enjoying the benefit of a major reduction in their mortgage payments with the drop in interest rates
There is also a view that banks and other lenders have tightened their credit criteria disproportionately on the bigger ticket items -especially for white and brown goods in particular.
So what can do we expect in 2010? Well unemployment will continue, I am afraid, and taxes will rise. This will lead consumers to have concerns about their levels of personal debt and a certain reluctance to take on more. Making the possibility of a ‘double dip’ in the recession a real one.
Next year, I am sorry to say, is going to be as difficult as the last for all of us, and for retailers it might be even tougher.
