Forget Brexit, Trump, cyber wars and giant floating icebergs. The talk of the week is shopping at Tesco in pink pyjamas: Right or Wrong?
In case you missed it, an outraged Tesco shopper demanded that people wearing pyjamas be banned from the shop after he snapped two women browsing groceries in their dressing gowns at 7pm in a Tesco store down south.
A storm has erupted on social media – one side branding the two lady shoppers as “bloody disgusting” while the other side attacks the photographer – customers’ attire is the shoppers’ own business, the comments were uncalled for and the store should ban such photographs.
Given the hand-wringing by retailers of late, customers in any attire would surely be welcomed. Such is the lament of the Scottish Retail Consortium director David Lonsdale that I daily await his appearance in the deep freeze aisle in bare feet and boxer shorts.
For months fearful retailers have been braced for a consumer spending downturn. From price rises triggered by the fall in the pound through the squeeze on household incomes to a spreading apprehension and loss of confidence over a slowing economy: the retail sector has its full share of woes even before their anguish over business rates and – for the big out-of-town stores – the rates supplement on large stores.
Barely had shops opened for the New Year than high street retailer Next suffered a 12 per cent share price drop after reporting falling sales and sounding a warning that 2017 would be “challenging”.
Nor, it seems, was Next alone. According to a sales tracker by accountants BDO, high street sales fell in December for the fourth year running, with a 0.1 per cent drop on the figure for December 2015. During the first three weeks of December fewer shoppers visited the high street, retail parks and shopping centres.
Online sales, of course, continued to soar – up by 19 per cent on a year earlier, and by a stunning 51 per cent in the final week of December. These now account for some 15 per cent of all retail spending. So are fears of a consumer-led downturn overstated?
Economy watchers have good cause for concern. Household expenditure accounts for about 60 per cent of the UK economy. Any slowdown here would quickly radiate across other sectors.
The biggest worry is the rise in input costs for retailers, who now have to pay more for the goods and raw materials imported from abroad. As many global commodity prices – and notably oil – are priced in dollars and the pound has lost some 17 per cent against the dollar since the EU referendum vote, retailers must either take the hit on their profits once currency hedging arrangements fall away or pass on the higher prices to consumers.
And as much of our food is imported, the biggest squeeze will be felt on poorer households which spend some 16 per cent of their incomes on food compared with an average of 11 per cent across the UK.
Add to this falling real wage growth and weakening consumer confidence and it is not hard to see why retailers are so apprehensive about 2017.
Yet there is another side to this high street coin. Scary though the premonitions may be, the real world story continues to defy these gloomy expectations. Retail sales surged six per cent in the most recent set of figures, with the previous month showing the fastest rate of growth in 14 years. And far from retrenching, households have been borrowing enthusiastically to fund a spending spree. Consumer credit, comprising credit card borrowing as well as other personal loans, jumped by more than 10 per cent in November compared with the same month of 2015.
Figures last week showed the UK service sector grew at its fastest pace for 17 months in December, the Markit/CIPS services purchasing managers’ index hitting the highest level since July 2015. Services, which include areas such as retailing and banking, make up more than three-quarters of the UK economy. This followed hard on the heels of construction and manufacturing sector data showing a similar pattern of growth. Taken together, the surveys point to GDP growth of 0.5 per cent in the final three months of the year.
And in case you missed it, the UK stock market last week recorded its sixth consecutive record closing high – the longest run of consecutive closing highs in the FTSE 100’s 33-year history.
These indicators continue to confound those widely publicised fears of the Treasury, IMF and Bank of England mandarins of a Brexit slowdown. Yet again, the doom-laden forecasts of an economy spinning downwards from the Brexit vote have proved seriously mistaken.
Little wonder Andy Haldane, the Bank of England’s chief economist in a speech to the Institute of Government last week likened the two badly-read calls – the 2008-09 financial crash and the Brexit vote – to the weatherman Michael Fish forecasting that there would be no hurricane coming “but it will be very windy in Spain”. He said it was a “fair cop” to say the profession had predicted a sharper downturn after the Brexit vote than has materialised.
The fact that the UK economy had held up better than predicted in the aftermath was, he added, a “thoroughly good thing”, putting it down to consumer confidence and the housing market. He said it was “almost as though the referendum had not taken place” and that people’s spending power had not been “materially dented” in 2016.
In the face of forecasts of a slowing economy, the Bank has cut interest rates further, to just 0.25 per cent, and stepped up Quantitative Easing. As a result, the balance of risk may now lean towards an out-of-control consumer boom rather than the downturn that retailers so fear.
Perhaps it is little wonder that happy but time-pressed shoppers have taken to visiting Tesco in their pyjamas. Might outrage over retail dress decorum now stretch to a ban on greeting the Tesco delivery van in bedroom slippers and night attire?
What matters more, surely, is that the shoppers keep turning up, online retail keeps growing – and that doorbell keeps ringing for the UK’s consumers.