It could have been the horrendous traffic jams I encountered over the Easter weekend. Maybe it was a clutch of relatively upbeat data. Or was it one or two anecdotal reports of very strong spending in recent weeks?
The upshot is that I have wondering whether the British consumer, perhaps against the odds, is making a bit of a comeback. Consumer spending, as I have noted before, has never been as depressed at this stage of a recovery as now.
Both consumers and businesses need to spend to turn a weak upturn into something more meaningful. The question this week is whether the consumer side is starting to spring into life.
Those traffic jams, in the face of record petrol and diesel prices and the fear of a tanker drivers’ strike, were on the face of it surprising. The latest Department for Transport figures suggest car traffic is about 3% below its all-time high, achieved in the final three months of 2006.
Even so, we drive 243 billion car miles a year, and the figure is rising. Maybe it is boosted these days by forced staycationers. People drive for all sorts of reasons, of course. One of them is shopping.
The British Retail Consortium’s March retail sales monitor showed retail sales value up by 3.6% on a year earlier on a total basis or 1.3% “like-for-like”; adjusted for additions to floor space.
The increase was due to non-food sales and the BRC attributed part of the rise to the warm weather during the month, which boosted purchases of clothing, footwear and outdoor products. Online non-food sales were up by 13.9% on a year earlier.
The BRC remains cautious, particularly over the willingness of consumers to splash out on big-ticket items. For some such items, however, people are spending.
New car registrations in March, the month of the new ‘12’ plate, totalled 372,835, up by 1.8% on a year earlier. What was striking about the figures however, from the Society of Motor Manufacturers and Traders, was the strength of sales to private buyers, up by 7.4% on a year earlier in one of the two key sales months of the year. New car sales to private buyers in the first three months were 5.8% up on the equivalent period of 2011.
The biggest ticket item of all, for most people, is the house. No sector has provided more mixed messages over the past two 2-3 years, around a generally stagnant overall picture, than housing.
Even here, though, there are more signs of life than one might expect. Tomorrow Rightmove, the property website, will report a big monthly increase in asking prices for properties, taking them to record levels.
Most other price measures are not as buoyant. But the latest LSL-Acadametrics house price index, derived from Land Registry data, was prices up by 0.2% last month, the fourth rise in a row and the seventh in the past nine months.
Last month was also, according to the LSL index, the first March since 2008 when housing transactions in England and Wales exceeded 60,000, There is a stamp duty effect in there: the end of the sub-£250,000 holiday for first-time buyers.
There may also be something else happening, however, if the latest survey from RICS (The Royal Institution of Chartered Surveyors) is to be believed. It has seen a pick up in sales and its members are more optimistic than for a long time about the outlook for house prices.
“There is growing evidence in the RICS survey of a more fundamentally driven market improvement,” it says. “It is possible that surveyors are now beginning to factor in less economic downside risk going forward.”
What does all this add up to? Consumer spending recorded a rare rise in the final three months of 2011, given its recent history. The evidence we have points to a second successive rise in the first quarter of 2012.
It is too soon to talk of the return of the rampant British consumer, still less the pre-2007 housing market, neither of which would be welcome anyway. The pain at Mothercare, as well as some other retailers, speaks of the battle for scarce shoppers’ pounds.
Perhaps the latest Ernst & Young Item Club report, out tomorrow, has it right. Professor Peter Spencer, its economic adviser, says: “For the first time in years, the gap between wage growth and inflation should start to close. This will feed through to the tills on the high street and will be given an additional boost by the Olympics.”
But the Item Club forecast is for a rise of just 0.8% in consumer spending this year and, as Spencer adds: “Make no mistake; consumers can’t lead this recovery.”
The contribution of consumers to the recovery depends on two things, both of which we will learn more about this week when official figures are released.
The first is employment. The Report on Jobs from KPMG and the Recruitment and Employment Confederation suggests job vacancies hit an eight-month high last month, with permanent job placements similar to February’s strong level.
The official unemployment figures may show an easing of the pace of increase but it is too early – and growth is too weak – for a significant drop in the jobless total yet.
The other key factor is inflation. As Alan Clarke of Scotiabank points out, whether it is petrol or stamp prices (a 30% increase in the price of a first-class stamp), most of the recent news has been inflationary.
It may mean that the March figures show no improvement on February’s 3.4% consumer price inflation, while retail price inflation could be only marginally lower than the 3.7% recorded then.
This needs watching. Falling inflation, to restore the growth in real incomes, is an essential part of the consumer story. If inflation does not fall much from here, that story will be very considerably weakened, if not snuffed out entirely.
The spring signs of a consumer revival are, like certain bedding plants, still very delicate. It would not take much of a frost to kill them off.
My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.
This post originally appeared at David Smith’s EconomicsUK and is posted with permission.