Newspaper article The Evening Standard (London, England)

Fragile Shoppers Meet Their Wile E Coyote Moment

Newspaper article The Evening Standard (London, England)

Fragile Shoppers Meet Their Wile E Coyote Moment

Article excerpt

Byline: ECONOMIC ANALYSIS Russell Lynch

WITH barely two weeks to go until Christmas Day, 'tis the season to be thrashing the plastic like no tomorrow. So far, at least, the British consumer is in full swing.

Usually by this stage of the festive season at least one major chain has hit the stock market with a profit warning, but the retail scene has been remarkably serene.

Black Friday has been and gone, and we've seen the fastest rise in online spending since 2009 in the past month, according to Visa.

The credit card company has a good claim to know the mindset of the consumer as PS1 in every PS3 spent in the UK is on a Visa card; its index suggests the fastest rate of overall consumer spending growth for two years.

The bullishness has been helped by rock-bottom mortgage rates, an easy supply of credit and still-low inflation in the immediate post-Brexit period.

Don't discount the "sod it, it's Christmas" factor as well, which means that probably not many shoppers wanted to listen to the Bank of England Governor play the ghost of gloomy Christmas future this week.

Mark Carney clearly wasn't enlivened by a drop of the seasonal cheer when he penned his latest speech. Aside from warning of a "lost decade" for incomes and threatening a beleaguered middle class with the rise of the robots, arguably the glummest part of his message focused on the prospects for a recovery largely driven by our household wallets.

Raising an arch Governor's eyebrow, he emphasised the major role which consumption is playing in the UK's recent growth. He's also had a sneak preview of research to be published by the Bank for International Settlements next year, which uses evidence from a range of countries over the past 25 years to suggest that "episodes of consumption-led growth tend to be both slower and less durable".

According to the Governor, that's because consumption growth eventually outpaces rises in earnings, piling up more debt on consumers and making demand more sensitive to changes in employment and income.

You don't have to be a rocket scientist to work out where those changes are going to come from. …

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