David Prosser: Mixed signals from retail, but not for long

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The Independent Online

Outlook Less than a fortnight ago, the Office for National Statistics published new data showing a surprise fall in retail sales over the previous month on exactly the same day as three leading retailers published better-than-expected trading updates. Yesterday, that contradiction was neatly reversed. CBI figures suggested the last month has been the best on the high street for more than six years, while three businesses based on that very thoroughfare published downbeat assessments of their fortunes. What on earth is going on?

Well, at the risk of stating the bleeding obvious, it's clear that the signals on consumer spending are extremely mixed. Individual retailers are having quite different trading experiences and performance overall is sufficiently volatile to produce quite different outcomes when surveys are conducted over slightly different time periods with varying methodologies.

Still, what almost all of the high street now seems to agree on is that the outlook is becoming much less uncertain. The next six to 18 months will be a period during which retailers struggle against difficult headwinds: rising unemployment, slow wage inflation, higher taxation, public spending cuts and so on.

The trend has begun. Yesterday, the ONS revealed that consumer spending rose by 0.7 per centduring the second quarter of the year despite a 1.6 per cent fall in disposable incomes. The gap is accounted for by a fall in the share of household income saved from 5.5 per cent in the first quarter to 3.2 per cent in the second three months of the year.

Charlie Bean, the Bank of England Deputy Governor who earlier this week urged people to keep spending, need not have worried, it would seem. So far, at least, this is exactly what consumers have been doing. Still, you can see why Mr Bean feels so anxious. These raids on the piggy bank are not sustainable for too long – certainly not for long enough to get retailers through 2011 unscathed.

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