Ross Clark Ross Clark

Will the high street slump spell trouble for the economy?

Credit: Getty images

Consumers seem finally to have thrown in the towel: they are no longer propping up the economy. After a year in which the predicted recession kept failing to arrive, the high street finally ran out of steam in December with a hefty 3.2 per cent fall in sales volumes compared with November. Non-food was down 3.9 per cent. Year on year, according to the retail sales figures published by the Office for National Statistics (ONS) this morning, sales were down 2.8 per cent in December.

This would appear to mark a headlong descent into recession – except that GDP figures published last week appeared to show the opposite: the economy rebounded by 0.3 per cent in December. So are we really sliding into the abyss or is the economy just fine?

There are ways to spend money other than in the shops or online. People can go to pubs and restaurants, they can have the builders in to put up a new extension, or they can travel. Moreover, businesses can invest, or produce more for export. The government, too, spends money – so it is not impossible to have the high street in recession while the rest of the economy does well. 

Since the pandemic, retail sales and the general economy seem to have become decoupled

Alternatively, could December’s retail sales figures simply be a statistical quirk? The ONS’s figures are seasonally-adjusted, which means they are trying to take account of Christmas and smooth out retail spending as if it were spread equally across the year. The trouble, however, is that assumptions have to be made about how much more people will spend at Christmas. If those assumptions are out of date, and people are no longer conforming to the pattern of a huge pre-Christmas spending splurge, instead spreading out spending more across the year, it could skew the figures.

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