The retail sector falls back to earth with a bump

September’s sales numbers aren't cause for alarm though.

After a run of reasonably solid growth, September’s sales numbers bring the retail sector back to earth with a slight bump. Growth is still present, which indicates that there is still forward momentum in the consumer recovery, but it has moderated significantly from the relatively heady levels seen in both July and August. While this might be the cause of some initial concern, it should not necessarily be a cause for alarm.

In the first instance, patterns of recovery are rarely even: seeing month on month of ever inflated growth certainly makes for a pleasing looking chart but, judging by historic standards, the exits from downturns are normally characterised by periods of growth which wax and wane. In essence, a reduced growth rate is not an indication of impending doom for the retail sector.

The further point to make is that, to a degree, a shallower growth rate was always to be expected as we exited the summer months. The sun had an overall net positive impact on sales which, when combined with some modest growth due to the natural uptick in consumer sentiment and spending, created some very rosy looking figures. This was never likely to continue ad infinitum, and what we are now seeing is the more natural, underlying growth rate which is reflective of the true pace of recovery.

Of course, the outturn could well have been different should the weather had been firmly on the side of retail. Unfortunately, it wasn’t. As autumn and early winter stock arrived on the shop floor what most retailers, especially those in clothing, wanted was a sharp cold snap; what they got was rather murky but fairly warm and humid weather. This tells us something interesting about the consumer psyche: while many people do have the capacity to spend, large numbers are reluctant to do so unless they feel a real need or justification. Before the downturn it is likely many consumers would have been willing to invest in a new coat in anticipation of colder weather to come; nowadays attitudes have hardened and significant numbers will only buy if and when the need arises. This change, a switch to a slightly more hand-to-mouth pattern of purchasing if you will, ultimately means retail growth rates are much chopper and leaves retailers far more exposed to the vagaries of the weather than they once were.

Our view is that this consumer mindset will prevail, even as we move into recovery. As such, we are unlikely to see retail rocket back to health; instead, it will more likely take a rather gentle upward glide path. Ultimately, the positive news is that, the exactitudes of the numbers aside, upward momentum still remains.

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Why relations between Theresa May and Philip Hammond became tense so quickly

The political imperative of controlling immigration is clashing with the economic imperative of maintaining growth. 

There is no relationship in government more important than that between the prime minister and the chancellor. When Theresa May entered No.10, she chose Philip Hammond, a dependable technocrat and long-standing ally who she had known since Oxford University. 

But relations between the pair have proved far tenser than anticipated. On Wednesday, Hammond suggested that students could be excluded from the net migration target. "We are having conversations within government about the most appropriate way to record and address net migration," he told the Treasury select committee. The Chancellor, in common with many others, has long regarded the inclusion of students as an obstacle to growth. 

The following day Hammond was publicly rebuked by No.10. "Our position on who is included in the figures has not changed, and we are categorically not reviewing whether or not students are included," a spokesman said (as I reported in advance, May believes that the public would see this move as "a fix"). 

This is not the only clash in May's first 100 days. Hammond was aggrieved by the Prime Minister's criticisms of loose monetary policy (which forced No.10 to state that it "respects the independence of the Bank of England") and is resisting tougher controls on foreign takeovers. The Chancellor has also struck a more sceptical tone on the UK's economic prospects. "It is clear to me that the British people did not vote on June 23 to become poorer," he declared in his conference speech, a signal that national prosperity must come before control of immigration. 

May and Hammond's relationship was never going to match the remarkable bond between David Cameron and George Osborne. But should relations worsen it risks becoming closer to that beween Gordon Brown and Alistair Darling. Like Hammond, Darling entered the Treasury as a calm technocrat and an ally of the PM. But the extraordinary circumstances of the financial crisis transformed him into a far more assertive figure.

In times of turmoil, there is an inevitable clash between political and economic priorities. As prime minister, Brown resisted talk of cuts for fear of the electoral consequences. But as chancellor, Darling was more concerned with the bottom line (backing a rise in VAT). By analogy, May is focused on the political imperative of controlling immigration, while Hammond is focused on the economic imperative of maintaining growth. If their relationship is to endure far tougher times they will soon need to find a middle way. 

George Eaton is political editor of the New Statesman.