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Friday, 6 January 2017

Brexit: and an unexpected boost in retail spending... or not

The front pages of today's papers are dominated by the admission from the Chief Economist at the Bank of England that their predictions for the post-Brexit economy were wrong:
Bank of England's Andy Haldane says Brexit forecasters had 'Michael Fish moment' | City & Business | Finance | Daily Express
Andy Haldane says economists suffered Michael Fish moment over financial crisis and Brexit | Daily Mail Online
Economists called Brexit wrong, but so did the Bank of England | Coffee House

It is a little more nuanced - with an unexpected boost coming from consumer spending... or not:

Andy Haldane: Bank of England has not changed view on negative impact of Brexit


Bank of England chief economist says pain has been delayed rather than avoided

He blamed the profession’s reliance on models that were built for an age when consumers and businesses, and especially banks, “behaved rationally”. Since 2008, consumers have maintained their spending when the classic economic models would have expected them to be more circumspect.

“I think, near-term, the data, the evidence we’ve been accumulating since the referendum, has surprised to the upside. [There’s been] greater resilience, in particular among consumers and among the housing market, than we had expected. Has that led us to fundamentally change our view on the fortunes of the economy looking forward over the next several years? Not really.

“We are still expecting this rather difficult balancing act for monetary policy with a slowing, not a huge slowing, but nonetheless a material slowing, during the course of next year as the effects of higher prices in the shops begin to chew away a little at the spending power of consumers and cause them to rein back a little in their spending. That remains our central view, with huge amounts of uncertainty around it.”

Bank of England economist admits Brexit error - Citywire Money
Chief economist of Bank of England admits errors in Brexit forecasting | Business | The Guardian
Andy Haldane: Bank of England has not changed view on negative impact of Brexit | The Independent

And:

Retail sales edge lower in December, price pressures spiral - surveys

A spending spree by British shoppers in the week before Christmas failed to prevent sales in December from falling short of the previous year's level, while shop prices are expected to surge in 2017, surveys showed on Friday.

Robust growth in consumer spending has been one of the main factors sustaining Britain's economy since last June's vote to leave the European Union. But many retailers fear a squeeze on spending as inflation begins to erode real earnings growth in 2017.

Monthly surveys from accountancy firm BDO and the European Commission (EC) showed retail sales slowed in December, with the latter showing a record jump in retailers' price expectations.


Retail sales edge lower in December, price pressures spiral - surveys | Reuters

This is what was being said before the Bank of England's statement, courtesy of the Daily Mail:


UK high street suffers the quietest December in almost TWO DECADES as shoppers cut back on spending


> Retail footfall was at its lowest December level since 1998 last month
> It appears the decline in store visits wasn't converted into a lift in online sales
> Indeed, Next posted a 7% drop in the end-of-season January clearance sales

The South West of England and Wales suffered the biggest footfall drop of all the regions, with a year-on-year decline of 14.4per cent.

UK high street suffers the quietest December in almost TWO DECADES | This is Money

With further comment from the EDW site:

GROWTH? NOT IN RETAIL

4 JAN 2017

Local Plans, Local Enterprise Partnership – constantly push growth, growth, growth. But REAL figures tell a different story – with possible big job losses in retail fairly soon across the country, but particularly in retail in our area, where is this ”growth” in jobs and housing construction coming from and going to? There will be no growth if new jobs in one sector are offset by losses in other areas.

“The UK high street suffered its quietest Christmas in almost two decades new figures have shown, just hours after clothing giant Next announced a sharp slump in festive sales.

Retail footfall was at its lowest December level since 1998 – the year consultancy Ipsos Retail Performance first started its Retail Traffic Index.
Depressing updates emerging from retailers suggest that the decline in store footfall wasn’t converted into a lift in online sales and consumers cut back on spending all round. …

… The South West of England and Wales suffered the biggest footfall drop of all the regions, with a year-on-year decline of 14.4per cent.”

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