Greg Wright: Hint of spring in the air as consumers confound forecasts

Shakespeare is silent on Macbeth’s views on quantitative easing, but I sense he would have been flummoxed by the sudden appearance of positive economic data.

Is it just possible that we might be over the worst? What a difference a week makes. In my last comment piece, I was prudently warning about the bumps on the road to recovery.

Exporters may boom, but retailers will still tumble, I said, because the world is paralysed by the crisis in Greece, which is sapping confidence from the high street.

Then along came last Friday’s official retail figures. Instead of hunkering down, shoppers went on a spending spree last month, boosting retail sales to a level not seen since last year’s Royal Wedding.

Perhaps the dark cloud of double dip recession is being blown away?

Consumers splashed out on furniture and sporting goods in the sales, according to data from the Office for National Statistics.

Retail sales volumes rose 0.9 per cent over the month to give an annual rise of 2.0 per cent.

Shoppers were encouraged to start spending by large discounts on household goods and furniture.

Optimists would also have taken heart from the Markit Household Finance Index survey, which came across my desk yesterday.

Britons, it seems, are becoming less worried about their finances as inflation eases and employers look more prepared to raise wages.

It’s further evidence that consumers are slowly regaining confidence. It also supports the Bank of England’s view that consumption will start growing again this year. Mortgage lending rose and house prices picked up in January.

Households reported the lowest degree of pessimism about future finances since April 2010, survey compiler Markit said.

As Markit economist Tim Moore noted: “These positive developments meant that debt levels stabilised and households’ appetite for major purchases moved back to levels not seen since the VAT rise in January 2011.”

Markit highlighted the fact that mortgage holders were more positive about their financial outlook.

Their mood was probably lightened by expectations of continued low interest rates.

Yesterday, there seemed to be an abundance of data providing some reasons to be cheerful.

At the very least, they gave real hope that the economy isn’t caught in a downward spiral.

The Council of Mortgage Lenders (CML) revealed that gross mortgage lending was up 10 per cent on the year in January. Property website Rightmove said asking prices for houses jumped 4.1 per cent on the month, posting the biggest rise in a decade.

Rightmove director Miles Shipside said. “There are...indications that those who are able to buy but had previously lacked the confidence to take the plunge are of a more positive mindset this year.”

In other words, they’re feeling more bullish about themselves and the economy.

Price pressures are also easing. You’re less likely to have a sharp intake of breath when you read your shopping bill.

Inflation fell to 3.6 per cent in January, down from a three-year peak of 5.2 per cent in September.

Howard Archer, the chief UK and European Economist at IHS Global Insight, said the figures certainly boosted hopes that the consumer may prove more resilient than expected over the coming months, and help the economy return to sustained growth.

However, he adds a note of caution: “Markit’s index still portrays a consumer under serious pressure.

“And it is unrealistic to expect the consumer to keep on spending at anything like the pace that was implied by January’s 0.9 per cent jump in retail sales volumes given a current still significant squeeze on purchasing power, high and rising unemployment and elevated debt levels. But if the consumer keeps spending ticking over through the next few months, it would significantly lessen the chances of any further GDP contraction.”

Sadly, a pocketful of positive surveys don’t make a recovery.

But they do highlight one important point, which all economists, and analysts must remember.

Human beings are unpredictable beasts.

Just when you think they’ll batten down the hatches, they decide to open their wallets instead. Much of last month’s retail growth was driven by cost-cutting. The mild weather probably helped. But the figures show that consumers still want to live a little, and don’t believe pleasure should be postponed until 2015.