On the bright side, although overall retail sales volumes remained relatively sluggish in July, much of the growth was concentrated on textiles and clothing, pointing to signs of strength on the high street. But the upturn came after dull sales in May and June and inflation figures yesterday - pointing to a 4.6 per cent price fall in clothing and footwear, one of the biggest on record - suggested the extra sales were won at the expense of margin.
That prognosis seems to chime with the gloom that descended on the sector in May and extended right through June after a series of profits warnings and negative trading statements from companies ranging from WH Smith, the news agent, to the women's clothes retailer Etam and House of Fraser, the stores group floated last year.
But the big picture seems at variance with the view that emerged from the companies last month, when the City's more dismal prognostications failed to materialise. Results and trading statements from nine separate players on the high street led to only one significant profits downgrade by analysts during the month - at MFI.
Despite the macro-economic evidence, the City has tended to discount talk of margin pressures at the big groups. Ian Macdougall of the broker Williams de Broe points out that gross margins have broadly held their own or increased at the four large stores groups since 1990, a period covering one of the worst retailing recessions since the Second World War. Boots, indeed, has seen its margins fatten steadily from 43.1 to 46.7 per cent in that time.
Any margin pressure experienced this summer is likely to be seen at fashion- dependent groups such as Etam, where poorly-received summer ranges in the spring coincided with a period of particularly cold weather. Offloading these unwanted stocks as the sun drew people back into the shops in July may account for at least part of the divergent trends evident in the latest economic statistics.
For most of the rest of the larger groups, observers remain confident that they will be able to cope with the new price consciousness among consumers. Savage cost-cutting has helped, but there has also been a structural shift through investment in information technology, which has cut stock and enabled retailers to change the mix at short notice to meet demand. Better managed operations, such as Argos, have even shown that the new environment can be used to their own advantage. Half-time profits up 43 per cent were won using low prices to generate healthy underlying sales growth of over 7 per cent.
But while retailers are coping with consumer diffidence and economic uncertainty, they are far from prospering. An interest rate rise of perhaps half a per cent towards the end of this year could take the shine off any tax cuts handed out by the Chancellor in November. In the circumstances, it may be too early to call the turn yet and investors should stick with quality stocks such as Marks & Spencer and Boots.