Poor consumer confidence rains on sunny retail figures

The good news? Retail sales were up last month. The bad news? The boost may be short-lived, if the latest consumer confidence data are anything to go by.

by Emma Haslett
Last Updated: 06 Nov 2012
Some much-needed relief for our hard-pressed retailers last month: according to the Office of National Statistics, the unseasonably warm weather, plus the extra bank holiday, helped to generate a 1.1% month-on-month rise in sales, 2.8% up on the same month last year. Sadly, these encouraging figures are rather at odds with Nationwide’s consumer confidence index, which has just fallen by two points to 43 – just four points above its record low in February. So it may be a very different story in the months to come…

In fact, if you look at the list of April’s best-sellers, they were mostly bank holiday-related: clothes sales were up by 2.3%, while food sales - presumably driven by burgers and sausages - rose by 2.2% (no word on bunting, though). Analysts have pointed out that while this might look encouraging, people will be far less enthusiastic about splashing out on champagne and sausage rolls without the nuptials of the Duke & Duchess of Cambridge to toast. In other words, as Howard Archer from Global Insight put it: ‘It suggests that pressurised consumers need a particularly favourable set of circumstances to part with their cash.’

And there’s little indication that circumstances will be any more favourable for the foreseeable future. According to Nationwide, 69% of people think the current economic situation is ‘bad’, while 39% think it’ll still be bad in six months’ time. And the jobs situation is also having an effect: six in 10 are convinced there won’t be many jobs about in six months’ time, while almost 20% think their income will be lower.

So a pretty gloomy outlook all round, particularly if you’re a high street retailer. The Government may have appointed ‘Queen of Shops’ Mary Portas with much fanfare this week to advise on how to save our shops. But slower consumer spending isn’t the only trend they have to worry about. Land Securities, the property developer that owns a slew of out-of-town retail premises, says that just 3.7% of its lots are vacant at the moment, compared with 14.8% on the high street – suggesting that more and more retailers are choosing to move away from the high street.

High rents are part of the problem; Mothercare CEO Ben Gordon has just decided to close over a hundred of his high street stores over the next two years, because the sites are ‘massively overpriced’. So Portas might want to start by talking to some commercial property landlords…

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