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.

Photograph: Getty Images

 Managing Director of Conlumino

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Richmond is a wake-up call for Labour's Brexit strategy

No one made Labour stand in Richmond Park. 

Oh, Labour Party. There was a way through.

No one made you stand in Richmond Park. You could have "struck a blow against the government", you could have shared the Lib Dem success. Instead, you lost both your dignity and your deposit. And to cap it all (Christian Wolmar, take a bow) you self-nominated for a Nobel Prize for Mansplaining.

It’s like the party strategist is locked in the bowels of HQ, endlessly looping in reverse Olivia Newton John’s "Making a Good Thing Better".

And no one can think that today marks the end of the party’s problems on Brexit.

But the thing is: there’s no need to Labour on. You can fix it.

Set the government some tests. Table some amendments: “The government shall negotiate having regard to…”

  • What would be good for our economy (boost investment, trade and jobs).
  • What would enhance fairness (help individuals and communities who have missed out over the last decades).
  • What would deliver sovereignty (magnify our democratic control over our destiny).
  • What would improve finances (what Brexit makes us better off, individually and collectively). 

And say that, if the government does not meet those tests, the Labour party will not support the Article 50 deal. You’ll take some pain today – but no matter, the general election is not for years. And if the tests are well crafted they will be easy to defend.

Then wait for the negotiations to conclude. If in 2019, Boris Johnson returns bearing cake for all, if the tests are achieved, Labour will, and rightly, support the government’s Brexit deal. There will be no second referendum. And MPs in Leave voting constituencies will bear no Brexit penalty at the polls.

But if he returns with thin gruel? If the economy has tanked, if inflation is rising and living standards have slumped, and the deficit has ballooned – what then? The only winners will be door manufacturers. Across the country they will be hard at work replacing those kicked down at constituency offices by voters demanding a fix. Labour will be joined in rejecting the deal from all across the floor: Labour will have shown the way.

Because the party reads the electorate today as wanting Brexit, it concludes it must deliver it. But, even for those who think a politician’s job is to channel the electorate, this thinking discloses an error in logic. The task is not to read the political dynamic of today. It is to position itself for the dynamic when it matters - at the next general election

And by setting some economic tests for a good Brexit, Labour can buy an option on that for free.

An earlier version of this argument appeared on Jolyon Maugham's blog Waiting For Tax.

Jolyon Maugham is a barrister who advised Ed Miliband on tax policy. He blogs at Waiting for Tax, and writes for the NS on tax and legal issues.