Thoughts of the crucial Christmas trading period begin to loom large for the sector, amid warnings of another unspectacular festive period.
As retailers return to work from their summer holidays, thoughts of the crucial Christmas trading period begin to loom large for the sector.
Foremost in many retailers’ minds will be questions about the shape and pace of the consumer recovery and whether gains in the first half of the year will deliver much-needed trading momentum in the second.
“The threat of an interest rate rise hangs over many households like the Sword of Damocles”
Chris Brook-Carter, Editor-in-chief
The macro indicators suggest that economic recovery in the UK remains on track and ahead of many projections that were made at the start of the year.
Data from Lloyds Bank released this week shows that consumer confidence rose to a four-year high in July. The bank says discretionary spending power had improved while the cost of essentials such as food and drink fell.
Meanwhile, GDP figures continue to paint a picture of an economy that has built up a head of steam and will deliver consistent growth into Christmas.
Yet, frustratingly, the combined effects of these economic levers are yet to translate into a sustained, broad-based recovery across retail.
A report by research group Mintel warned this month that we face another unspectacular Christmas. It forecasts sales value growth at just 3%, a lower rate than last year.
To some extent these lacklustre numbers are a result of ongoing structural issues in the grocery sector, which continues to weigh down retail’s general performance.
Anaemic real-term wage growth
But they also reflect the fragile nature of the uplift in consumer sentiment, which is being hampered by ongoing fears of a crisis in the eurozone and anaemic real-term wage growth.
The threat of an interest rate rise also hangs over many households like the Sword of Damocles.
Signs of a cooling housing market, the failure of wages to recover in line with other growth metrics and recent inflation figures would all suggest a near-term rise in rates is not only unnecessary but could have disastrous effects on the recovery.
Yet the Bank of England’s messaging about any future interest rates rise is frustratingly confusing. A poll by YouGov and Cebr found that just one in 25 of us understand the Bank of England’s forward guidance policy, which is meant to help individuals understand the forward path on rates.
That lack of clarity is generating unnecessary uncertainty for consumers. And clearer leadership now from the Bank and its governor would help lay the foundations for a merrier Christmas.