Scots retail sales hit by cold spring, late Easter

Food sales were down. Picture: PA
Food sales were down. Picture: PA
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SCOTLAND’S PMI data revealed the fastest rise in business activity for a year, as well as rising employment, while CBI Scotland’s economic forecast predicted 1 per cent growth this year and 2 per cent next year for Scotland’s economy.

“We need to be very careful about taking one or two sets of figures – such as this week’s PMI data – and feeling that we are now on to a stronger recovery,” said Professor Brian Ashcroft, emeritus professor of economics at Stirling University.

“I am not certain that this is the case, and it seems to me that we’re going to bump along the bottom for some time with some months picking up and others going down.”

Total non-food sales declined by 2.7 per cent compared with a year earlier, when they had decreased by 7.3 per cent, driven by a poor performance in fashion, where shoppers were put off from snapping up spring and summer clothes by the prolonged cold weather.

“A double whammy of factors beyond retailers’ control are the main causes behind what looks like a very dis­appointing set of results at first glance,” said Fiona Moriarty, director of the Scottish Retail Consortium.

“The cold and unseasonal weather outstayed its welcome longer than other parts of the UK, so demand remained cool for spring and summer ranges, especially in the clothing and footwear category. And the timing of Easter weakens the figures further – it fell in March this year, but April the previous year, meaning many categories suffered against a strong 2012 comparative, particularly food.

“But it’s not as bad as it looks,” she said. “If you strip out the Easter distortions, April sales growth was actually a slight improvement on March, and the overall three-month average is still marginally up on the same period in 2012.

“The figures don’t yet reflect it, but we’re seeing very tentative signs that the mood is starting to lift, especially consumer confidence, which has crept above the UK average for the first time since September.

“Retailers will be hoping the Bank Holidays and warmer weather will return a better set of results and boost this fairly subdued three-month average into more positive territory.”

Iain McMillan, director of CBI Scotland, said there was a “perfectly valid” explanation for the poor figures, but the economy was still firmly on track for 1 per cent growth this year.

“We are a little more optimistic,” he said. “Certainly the PMI does support our view that the worst is over.”

Over the first quarter of the year, growth remained positive at 0.3 per cent, but still trailing that of the UK.

Another area which suffered was stamp retailers, following an increase in price in April 2012. However, medicines performed strongly in April, mainly due to the changeable weather.

David McCorquodale, head of retail at KPMG, said: “April’s figures provide a dose of realism to remind us how tough the retail environment remains in Scotland.”

Families at full stretch financially

Almost half of UK households say they would struggle if their outgoings rose by just £99 a month, according to a report by Halifax.

Low wage inflation and increases in the cost of goods and services mean UK households are now at full stretch financially.

The generations being stretched the most are those in their forties and fifties, with 18 per cent now so close to the edge they would find it difficult to cope with an increase in expenditure of just £24 a month.

Experts believe higher bills – especially for utilities such as gas and electricity – are to blame for the squeeze.

On average, 26 per cent of households reported higher spending on fuel and energy bills in the past 12 months.

The good and the bad

• Home Accessories

Due to the timing of Easter, last month showed a dip in the improving trend witnessed in recent months. Bed linens and fabrics did best while outdoor living and barbecue sales were poor.

• Clothing

Even though the category posted a decline over last year, it finished on a strong note, showing that shoppers are ready to buy their summer essentials, but are just waiting for the right moment.

• Food shopping

Total food sales experienced their worst decline since our records began in January 1999. However, this was essentially due to the distorting effect of the week leading up to Easter falling in March this year.

• Electricals

Even though Other Non-Food was the worst of the categories last month, it is still trending several percentage points above the 2012 average. Electricals are the driving force in the category.

• Footwear

The weather conditions meant that boots were still selling last month, but demand for sandals was weak

• Health & Beauty

April was another good month for medicines, and even more so in Scotland than in the rest of the UK, because of the unstable weather.

Analysis: ‘We’re going to bump along for a while yet’

This Scottish Retail Consortium report does give us pause for thought, in that we have had some better economic data in recent weeks, but these figures suggest that we should say “Hang on a minute – things are not picking up as strongly as we might have thought”.

We need to be very careful about taking one or two sets of figures and feeling that we are now on to a stronger recovery.

I believe it is too early to say whether we are getting into a sustained recovery. I am not certain that this is the case and it seems to me that we’re going to bump along the bottom for some time with some months picking up and others going down.

Retail sales is important – official figures say that it, combined with wholesale, makes up 10 per cent of GDP – but mainly as an indicator is of what is happening generally. By definition, if the rest of the economy is better and people are secure in their jobs, then retail spending goes up.

However, I believe it is very difficult to predict what will happen. We are suffering from a fiscal consolidation.

When the UK economy is labouring under a significant fiscal consolidation more than other economies, it requires investment and growth in household spending and growth in export markets.

The problem is that the European economy is suffering too, and that is where a large proportion of our exports go. The main hope for growth is twofold: the US and China, where things are slower than they once were, but still moderately strong.

There is not much out there that says there is a real growth pick-up in the global economy.

• Brian Ashcroft is emeritus professor of economics at the University of Strathclyde.