“For retailers, this is a hand-to-mouth existence. Average shop prices for non-food stores are falling at an annual rate of 1.5 per cent, according to the BRC-Nielsen survey. Their task is to squeeze out extra volumes in a weak pricing environment. It is also to do so against a backdrop of weak consumer confidence, reflected in a flat housing market and, as Bank of England figures show, a reduced appetite for consumer credit. Consumers are downbeat, worried about the economy and what Brexit may bring. Now a general election has been added to the mix. That may prove to be an additional worry.

 

This is despite the fact that households are enjoying real wage increases — a combination of faster pay rises and low overall inflation — and employment is near record levels. There are signs, however, that both are fraying. The latest figures showed slightly softer pay growth alongside a small fall in employment and a rise in unemployment.

 

The latest Recruitment and Employment Confederation survey, published yesterday, shows that confidence among employers is very weak but that short-term hiring intentions remain buoyant. However, many employers have scaled back their long-term recruitment plans. The most recent YouGov-CEBR (Centre for Economics and Business Research) consumer confidence survey, also this week, shows the weakest confidence for six years and optimism about job security over the coming 12 months dropping.

 

What happens in the jobs market becomes critical. As long as consumers are mainly worried about the economy but not their personal finances or job security, they are unlikely to rein back too much on spending. But, as we have seen in previous cycles, once job fears take hold, spending will suffer. We are not there yet, though to some retailers it feels like it and they themselves are cutting jobs. It could be a long and nervous winter.”

 

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