Newspaper article The Evening Standard (London, England)

Spend! Spend! Spend! but Will the Bank Let the Party Last?

Newspaper article The Evening Standard (London, England)

Spend! Spend! Spend! but Will the Bank Let the Party Last?

Article excerpt

Byline: ECONOMIC ANALYSIS Russell Lynch

BACK in 1961 when Yorkshire housewife Viv Nicholson landed a record PS152,319 on the pools, the equivalent to PS3.2 million today, she told reporters she was going to "spend, spend, spend!". Nicholson, who died last month, lived up to her words, blowing a fortune in a rags to riches and back to rags again tale.

The winnings might not quite be on the scale of Nicholson's, but the British people have had a mini-pools win in tumbling food and oil prices over the past few months. According to Asda, the average UK household has an extra PS17 a week to spend on wants rather than needs, compared with last year. And judging by the recent data on High Street spending, they've taken Nicholson's example to heart.

According to the CBI's latest retail sales data, retailers report "sales for the time of year" in early May at their highest since April 2007. Expectations for next month are even more bullish, at their strongest for 27 years, as the non-food stores get their long-awaited day in the sun at the expense of the grocers, forced to retrench by a price war. Office for National Statistics figures showed sales volumes up 1.2% in April, growing almost three times as fast as expected.

Given the oil and food dividend, it's no wonder consumer confidence is at its highest for nine years. Nearly half of all shoppers market research firm Nielsen asked this month think it's a good time to make purchases, an all-time high for the survey.

And why shouldn't they? Real wages are still growing strongly, with inflation in temporarily negative territory and likely to remain below 1% until at least the end of the year. For homeowners, the cost of mortgages has tumbled: the Bank's latest data show the cost of a two-year fix with a 25% deposit is just 1.95%, and borrowers with a 10% deposit are paying 3.5% on average.

Expectations of a rate rise have receded, the Bank is sticking to its "limited and gradual" forward guidance, and much lower wholesale funding costs have pushed down borrowing rates. In the wider economy, firms added 200,000 jobs in the first three months of 2015. …

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