UK retail sales surprisingly good – but this doesn’t mean the recession is over

As reported by the British Retail Consortium (BRC) this morning, UK retail sales in January rose by 3.2% year-on-year, and by 1.1% on a like-for-like basis. According to the BRC, “by both measures, this was the best performance since May, when sunny weather had boosted sales.”

As you would expect in a recession, food sales grew faster than the overall market while non-food sales “remained down on a year ago, though by less than in December”.

 

The BRC continues to say that “sales were driven by widespread heavy discounting in clearance sales”, adding that “after a good start to January, sales growth then weakened as clearance sales ended. Shoppers took advantage of good deals, but many purchases were replacements and essentials rather than discretionary extras.” 

 

Clearance sales in January gave retail its biggest growth since May 2008.

Clearance sales in January gave retail its biggest growth since May 2008.

 

According to the BRC, clothing, footwear, homewares and health and beauty sales remained down on a year ago. Nice list of what British consumers do and don’t regard as a very essential good. I’m not saying Brits don’t wash, I’m just saying it’s interesting, haha… 

 

So, to sum it all up the retail sales data are surprisingly good, but they were helped by heavy discounting and aren’t really a sign of buoyant consumer spending. As in many other markets, consumer confidence in the UK is set to take a few more blows this year, first of all including widespread awareness of rising unemployment. Plus let’s always remember that there are considerable error margins associated with economic statistics, especially when we’re talking about timely first statements that are all based on preliminary data evaluation.

 

However, the fact that the ONS is an industry lobby group that has historically complained about national stats figures being too positive probably means that retail sales actually rose in January, even after the next couple of data revisions.     

 

“This is becoming the most serious global recession for over 100 years”. Times could be tougher than in the depression of the 1930s, when male unemployment in some cities reached 70%, he says, and the recession’s impact will last for 15 years, and the Nazis might take over. Mummy, what’s a doom monger?

Ed Balls: “This is becoming the most serious global recession for over 100 years”. Times could be tougher than in the depression of the 1930s, when male unemployment in some cities reached 70%, he says, and the recession’s impact will last for 15 years, and the Nazis might take over. Mummy, what’s a doom monger?

 

The mainstream forecast for the UK continues to be hesitant economic recovery from late 2009/early 2010, combined with virtual stagnation in 2010. The better-than-expected January does not mean the recession is over. But perhaps it means that not everything is going downhill as often suggested by certain media. “We need to be realistic”, as a former colleague now living in Australia recently told me, “but it doesn’t have to be all doom and gloom”.

 

Take care of yourselves,

Boris

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