Consumers not facing a crisis of confidence - yet

Consumer confidence was only modestly hit by the riots and market struggles last month. But retailers are still taking stock...

by Dave Waller
Last Updated: 06 Nov 2012
A rare bit of retail news today in that it can almost be spun to sound positive: Nationwide’s Consumer Confidence Index dropped in August, which is no massive surprise, but the fact that it fell only a mere point, to 48, almost has a ring of triumph about it. Given the state of the high-street that month - with ‘feral youths’ chucking bins through windows against a backdrop of stagnant pay and a trolley-load of austerity measures - it wouldn’t have been a surprise if the mercury on the can-do gauge had sucked itself right back into the bulb.

That said, you have to acknowledge that it’s hard for confidence to drop too far when it’s already looking royally shot. The index was at 64 for the equivalent period last year, a significant amount higher, and the all-time low was when it hit a measly 41 back in February. We’re not far above that again now, with consumers predicting a 1.3% fall in housing prices over the next six months, and with the IMF warning of a future of on-going pain the possibility of returning to those levels seems remarkably real.

Speaking of on-going pain, JD Sports has calculated the cost of the looting last month to be £700k of stock from 16 stores, one of which is still closed due to fire damage. Profits for the six months to July still rose 21% to £20.1m, but while the riots haven’t affected their results too much, it too is remaining incredibly cautious about the rest of the year. As we know, opportunistic trainer theft is perhaps the least endemic of the threats retailers face.

The trick it seems may be to plant your soles further a field. Note the fortunes of Inditex, the owner of the Zara fashion chain and the world's largest clothes retailer - it opened 177 stores during the period and now has nearly 10% more staff than a year ago. Its net income for the first six months of the year was up 14% on the Eur628m it made a year earlier, to 717m euros ($981m; £625m). Now it’s planning to extend its global approach and send Zara into South Africa, Taiwan, Georgia, Azerbaijan and Peru.

The Nationwide survey doesn’t extend to cover the consumer confidence of the average Peruvian or Azerbaijani, but if you’re looking to thrive in the face of the current uncertainty, then spreading your bets doesn’t seem a bad idea.
Economy Retail

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