Martin Flanagan: Consumers remain surprisingly confident

Despite the gloomy economic backdrop, consumers continue to splash the cash. Picture: John Devlin
Despite the gloomy economic backdrop, consumers continue to splash the cash. Picture: John Devlin
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That jarring sound between consumer confidence and the more unhelpful backdrop continues to surprise.

Food prices rose at their fastest rate in May for more than three years, the British Retail Consortium says, up to 1.4 per cent from 0.9 per cent in April.

The damage was done by the weak pound, which has been flailing since last June’s Brexit vote, pushing up import prices. Recent data from the services sector – the lifeblood of the UK economy – also shows that it has been hit by stagnant wages growth and rising inflation.

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And, yet, far from an acknowledged tougher environment deterring shoppers, a separate report from the GfK consultancy found that consumer confidence actually lifted in May, increasing two points to minus five.

• READ MORE: Business confidence tumbles to eight-month low

What to make of it? Maybe consumers’ nonchalance is just due to cumulative fatigue: Brexit-fatigue, Trump-fatigue, impending UK election fatigue, making them retreat into shopping therapy to get away from it all. Not scientific at all, but how else to explain confidence in the face of evidence that economic pressures are worsening.

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Perhaps, May was a case of animal spirits coming from that old source, “it’s summer, we’ve still got jobs, we’ve booked a holiday, things can’t be too bad”.

And it is not just sentiment. Shoppers are putting their money where their mouths are. The most recent Office for National Statistics retail numbers showed sales up a bumper 2.3 per cent in April compared with the previous month.

• READ MORE: Discount grocers’ sales rocket amid rising inflation

Perhaps another factor in consumer confidence is the general competitiveness of the retail sector. Retailers are not so far passing all their extra import costs on to customers, fearful of them going elsewhere, so shielding them from the worst of the input pressures.

Gateways to sales heaven?

Supermarkets are hitting the diversification trail – Tesco with wholesaler Booker, and Sainsbury’s with catalogue retail stalwart Argos. Now Tesco has revealed that it has agreed with Dixons Carphone to begin trialling Currys/PC World concessions in its biggest stores.

The way Argos has outperformed for Sainsbury’s, who’s to say supermarkets-as-gateways won’t have legs?

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