Thursday, 27 December 2007

Shopping our way out of a recession


At last, some good news from the shopping centres. Figures from Footfall, the market research group, showing a 25.1% increase in shopper numbers for the last weekend before Christmas compared to 2006. The UK shopper may have saved the day. All that buying might have kept the the UK from slipping into a recession, at least for a while.

It remains something of a mystery what keeps the UK shopper going. It certainly isn't income growth, which in recent years has barely kept up with inflation. The level of consumer debt now stands at 160 percent of disposible income. With that kind of debt burden, it would be reasonable to think that consumers would stop and try to repay some of it back. However, neither crushing debt levels nor stagnant income can keep the consumer away from the shops.

This week's spending spree only serves to highlight the contradictory policy stance of the Bank of England. Recent data shows that the economy grew very rapidly in 2007; the credit crunch hasn't deterred consumers from shopping, while inflation is rising sharply. However, the Bank of England seems desperate to cut interest rates.

The contradictions can only be explained by recognizing that the Bank of England has changed its mandate. It is no longer interested in price stability. Instead, it wants to maintain house price inflation.

5 comments:

Anonymous said...

I was in Meadowhall today...it was bloody murder.

speedtheplow said...

Exactly as I have said before. The BoE is determined to keep the credit faucet on. And that means debt can grow (keep on growing)to mountainous levels. It could take years to come unstuck. By that time I will have had to leave the country, because I cannot afford to live here unless somethting is done about the rampant inflation in living costs. And if not the Bank, who?

Budvar said...

An increase in the number of shoppers means bugger all if nobodies buying anything.

Places like Meadowhell (as it's colloquially named) full of people milling about is one thing, but how many people were loaded down with bags of shopping?

I'll wager you could count the numbers on the fingers of one hand.

speedtheplow said...

The figures for expenditure haven't come through, have they? So you could be as wrong as I am, budvar old chap.

01/20/2009 the end of an error said...

What can't continue will not continue. There is a limit once reached is like a light switch. The malls were spooky quite this last weekend in the USA. No waiting on Christmas Eve at the 3 stores I visited.