Two sets of figures out this week:
CPI is 5.2%; RPI is 5.6% (where did the 2% target go?)
Scottish Retail Sales: Total up 0.8%, Like for Like down 0.6% (UK comparables +2.5% and +0.3%).
As the Scottish Retail Consortium note in their commentary on their (SRC-KPMG Scottish Retail Sales Monitor) sales figures, put these two sets of data together and you can see why retailers in Scotland are in deep trouble. With consumer inflation way ahead of retail sales, business inflation equally high (and that’s forgetting any “health levy”), disposable incomes set to fall further and job losses in the public and other sectors likely to increase, Christmas and Hogmanay are the only real potential bright spots on the horizon.
Scotland has now underperformed the UK for almost the last two years, with the detailed figures showing a real collapse in non-food sales in Scotland. The only hope is that we get a good festive season to tide retailers over. Given the huge sales and proportion of profits made at this time of the year by retailers, there is much still to gain – and lose. A bad Christmas and we could see quite a lot of closures in the New Year. A good Christmas – if consumers loosen their belts a bit and celebrate – or if retailers have bought and managed costs well – will see them well placed to soldier on.
The problem for retailers is that consumers are nervous about the future and worried about their costs, whether it be energy or food. As a result they are holding back big purchases, trading down to value and lower brand points, perhaps paying off debts at record low rates and generally hunkering down. Yes, there is the occasional treat and replacement of luxuries, but for many it is about surviving.
The Scottish Government is reported as saying that it was doing all it could, within its current powers, to boost economic security and consumer confidence in “tough times”. “Measures such as the council tax freeze, free prescriptions and no tuition fees are helping promote consumption in Scotland by protecting household budgets at a time of rising inflation and fuel prices.”
However, I am not sure such measures actually “promote consumption”. Do consumers see the money they don’t have to pay for prescriptions as money they can then spend on other things, given the rising costs of fuel etc? I doubt it. I suspect they recognise the lack of added costs, but don’t equate this to “go out and spend”.
It does make one wonder therefore why all the effort and fuss about Quantitative Easing (which seems to be a case of “do X and hope like anything that Y happens, and if it doesn’t do X again”) putting money into and through the banking system. I wonder what would happen if a scheme could be devised to put money directly into the hands of consumers, to be spent on consumer goods through (all or some) shops? Might that have a more direct effect on promoting consumpiton and supporting some hard pressed businesses?