In a rare piece of economic good news, today’s retail sales figures show that Britons continued to spend on the high street this month. There was a 0.9 per cent increase in spending since last month. This figure defies predictions: analysts were expecting that after Christmas, we would see a fall of around 0.3 per cent. This is particularly good news as the Christmas season was better than expected, too.
It is being hailed as evidence that the economy might be growing again, and that we might not see a double dip. But should we be celebrating? Perhaps not yet.
Firstly, some economists are wary of official retail sales figures, which often give a different picture to unofficial surveys carried out by the CBI or British Retail Consortium. Technically speaking, because there is such a sharp drop in spending between December and January, the ONS “seasonally adjusts” the figure. It is difficult to ensure this adjustment is accurate.
Secondly, analysts have suggested that the drop off in spending has been delayed rather than bypassed completely. If this is the case, next month’s figures will show spending falling back.
As Samuel Tombs of Capital Economics argues in the Financial Times, “there are reasons to think that this strong growth cannot be maintained”, such as rising unemployment and tight credit conditions.
We must keep a close eye on the figures for the next few months to see whether this month’s strong growth was an anomaly.
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