IEA economist responds to latest retail sales data
20 May 2022
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Commenting on the latest ONS retail sales and GfK consumer confidence data, Julian Jessop, Economics Fellow at free market think tank the Institute of Economic Affairs, said:
“Much of the coverage of the latest consumer confidence surveys is too negative. Yes, the headline GfK index hit a record low in May, as you would expect when there is an unprecedented cost of living crisis. But the correlation with actual spending is weak.
“The forward-looking ‘outlook’ components are holding up. One reason for optimism is the strength of the labour market. Job security is high and this means that those with savings built up during the pandemic are more likely to use them to maintain spending.
“Another reason for optimism is the increase in the National Insurance threshold in July, which will deliver a significant tax cut, and the prospect of more support from the government in the coming months.
“Consistent with this, retail sales were better than expected in April, rebounding by 1.4 per cent. This was led by strong growth in alcohol, confectionery and tobacco sales – possibly an Easter distortion, or people drowning their sorrows.
“But it is also worth noting the strong growth in clothing sales. This fits in well with other evidence that life is getting back to normal after Covid, including a revival in the hospitality sector (not part of ‘retail’). People are getting ‘glammed up’ again for weddings and holidays, and socialising.
“Of course, there is no room for complacency. The trend in retail sales is still downwards and confidence is clearly fragile. The government will still to need to do more. But much of the gloom is overdone.”
ENDS
Notes to editorsContact: media@iea.org.uk, 07763 365520IEA spokespeople are available for interview and further comment.
“Much of the coverage of the latest consumer confidence surveys is too negative. Yes, the headline GfK index hit a record low in May, as you would expect when there is an unprecedented cost of living crisis. But the correlation with actual spending is weak.
“The forward-looking ‘outlook’ components are holding up. One reason for optimism is the strength of the labour market. Job security is high and this means that those with savings built up during the pandemic are more likely to use them to maintain spending.
“Another reason for optimism is the increase in the National Insurance threshold in July, which will deliver a significant tax cut, and the prospect of more support from the government in the coming months.
“Consistent with this, retail sales were better than expected in April, rebounding by 1.4 per cent. This was led by strong growth in alcohol, confectionery and tobacco sales – possibly an Easter distortion, or people drowning their sorrows.
“But it is also worth noting the strong growth in clothing sales. This fits in well with other evidence that life is getting back to normal after Covid, including a revival in the hospitality sector (not part of ‘retail’). People are getting ‘glammed up’ again for weddings and holidays, and socialising.
“Of course, there is no room for complacency. The trend in retail sales is still downwards and confidence is clearly fragile. The government will still to need to do more. But much of the gloom is overdone.”
ENDS
Notes to editorsContact: media@iea.org.uk, 07763 365520IEA spokespeople are available for interview and further comment.
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