Sometimes, it feels that working out the meaning of the various metrics used to gauge consumer sentiment is like searching for meaning in the tea leaves at the bottom of your cup.
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Take this week. Footfall is up.
This is terrific news, even if the 3% increase recorded during 2023 still leaves shopper numbers below pre-pandemic levels. They are moving in the right direction.
However, even this trusty measure of retail prospects is complicated. The data from MRI Software found a number of times during the year when shopper numbers dropped, but key calendar fixtures saw big jumps to even things out. And while shoppers were visiting stores, more than four fifths of them were seeking to save money on essential purchases due to higher costs. Every message is a mixed one.
The amount of money that consumers can spare is of course a key factor. So retailers watch inflation carefully.
Despite government targets to reduce inflation, it has unexpectedly gone up again. This is bad news. Price increases on alcohol and tobacco products might be partly to blame, but further disruption to shipping lanes in the Red Sea will fuel inflation worries. Will shoppers feel a bit richer or even poorer next month?
A related factor is interest rates, which will impact mortgage costs – or interest payments for those with savings. Rising inflation may delay plans to reduce interest rates, or risk a further increase in inflation if they are reduced.
And while the fortunes of different retailers will always vary, it is notable that supermarkets are currently making hay while the (winter) sun shines, while discretionary purchases are holding less appeal for customers.
Supermarket chain Booths saw record sales over Christmas, Tesco has upgraded profits guidance after better-than-expected sales, and Sainsbury’s saw a healthy surge in like-for-like sales, but things are far tougher for fashion retailers. Superdry has issued a profit warning and Mulberry saw sales drop due to a ‘challenging macroeconomic backdrop’,
With the state of the economy driving mounting pressure on the government, in an election year, the amount of money in people’s pockets will be a key campaigning issue.
One of the most obvious bellwethers of any changes will of course be the retail sector. Brace yourself for a confusing barrage of figures over the next few months.
