Christmas Shopping Season off to Flying Start

Posted on 5 December, 2012 by Kirsten Kennedy

The past few years have taken their toll on the retail industry, with many chains being forced to liquidate or downsize as a result of reduced consumer spending. Even during the Christmas season, which is traditionally a boom time for retailers, revenues remained much lower than they would have been in years previous to 2008.

This makes Christmas 2012 – the first in four years where the recession is not an ever present dampener on the seasonal spirit – especially important, as it will give retailers some indication of the mood of consumers going in to the New Year. Rumours are constantly circulating about a triple dip recession, which may make shoppers nervous about spending too extravagantly, yet the early signs indicate that the high street could be on the way to recovery this festive season.

The latest monthly report from the Confederation of British Industry (CBI) shows that November sales grew at the fastest rate since June when a spate of good weather encouraged shoppers back onto the high street. This defies expectations as growth was not predicted to be so immediate and indicates that consumers are once more prepared to embrace the commercial side of Christmas.

In fact, 49 per cent of store owners who participated in the study claimed that trading this year has greatly improved when compared to November 2011, with only 16 per cent claiming to have seen a drop in their sales. Yet it is still early days, and even the most despondent retailer still has time in the run up to Christmas to encourage consumers into their store.

The CBI’s Head of Economic Analysis, Anna Leach, believes that the report is an early signal of a more profitable year for the retail industry in 2013, although she concedes that full recovery is still some way off.

She says; “This month’s survey is a reason to be cheerful as we head into the festive period.

“Retailers across the board will be heartened by these encouraging results. The increase in employment, along with expectations for improvement in the business situation over the next quarter, points to a welcome boost in the sector.

“But the fact that retailers are still reluctant to authorise new capital expenditure shows that there is still some way to go before activity on the high street is back to normal.”

Furthermore, the busy Christmas period has meant that many chains have begun to hire additional staff to cope with strong demand and longer opening hours as the day draws closer. This will come as welcome news to those who are still struggling to find employment because, although these positions do tend to be temporary, it gives those who fall into the bracket of “long term unemployed” a chance to add experience and references to their CVs.

Of course, the bigger picture must also be examined when looking at figures from the retail industry – namely, how this new boost in consumer spending will affect the economy. Should consumers continue to spend into 2013, there is a much lesser chance of the country slipping back into recession. Yet, in something of a Catch 22 situation, consumers may be unwilling to spend freely just in case the warnings of a triple dip recession are borne out.

Markit’s UK analyst, Chris Williamson, claims that consumer spending can only increase to a certain extent until several other factors also begin to improve.

He says; “UK consumers appear to be in spending mode in the lead up to Christmas, though households are likely to act cautiously in relation to non-essential spending for some time to come.

“It is hard to believe that any sustainable and robust improvement in consumer spending is likely until unemployment falls further, wage growth picks up and lending to households improves, and recent data suggests that the latter shows no signs of perking up despite the Funding for Lending scheme.”

Do you think an improvement on the high street will ensure that Britain remains firmly out of recession, or will the growth in the retail industry have to be significantly more long term for the economy to benefit in any real way? How do you think the other factors mentioned by Mr Williamson could be combatted so the retail industry does not suffer as a result of lack of spending?

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