Fears that Britain's consumer-led recovery is losing momentum are increasing amid signs that the rising cost of living is hitting confidence and high-street spending.
The latest survey of sentiment towards the economy shows that the steady rise in confidence seen the start of the year has slowed in the past month.(Wire Hook)
Thursday's report from YouGov and the Centre for Economic and Business Research followed the CBI snapshot of retailing, which found that upbeat business forecasts from shops(Wire Hook) and stores had fallen short for a second month.
Official data from the Office for National Statistics revealed that consumer spending was a crucial factor in the 0.8% jump in national output in the third quarter of 2013, but the CBI and YouGov/CEBR studies point to a slowing in the first weeks of the fourth quarter.
The ONS's figures for GDP showed that manufacturers were increasing their stockpiles of unsold goods in the three months to September in anticipation of the surge in consumer spending, seen in the summer, continuing into the winter.(Wire Hook)
Retailers are banking on consumers rushing to the shops in the last few weeks before Christmas, the CBI said, as it published its latest distributive trades survey – which showed sales volumes well(Wire Hook) down on expected levels in November despite increases in staff to cope with a hoped-for surge in spending.
Mirroring other recent surveys of the retail sector, the monthly distributive trades survey suggests that the cost of living rises and news of big increases in energy bills(Belt Display Rack) are making consumers more cautious.
Barry Williams, chief merchandising officer for food at Asda, and chair of the CBI distributive trades survey panel, said: "This is the second month in a row that retailers' expectations for growth have been disappointed, perhaps due in part to the mild start to autumn.
"But despite challenging conditions(Card Holder) on the high street, retailers remain optimistic for the Christmas period, and have taken on more employees in anticipation of a shopping rush that should add jingle to the tills."
The CBI data shows department stores(Store Fixture), grocers and clothing shops are finding trading conditions particularly tough, but the recovery in the housing market is helping sales of household goods and DIY equipment.
YouGov/CEBR said consumer confidence rose in November for the 11th successive month but the boost was smaller than in any month since February and still left optimism five points below its level at the time the financial crash broke in 2007.
Stephen Harmston, head of syndicated reports at YouGov, said: "While consumer confidence is still improving it looks like it is starting to flatten out. There is now a large discrepancy opening up between how [people] feel about different areas of their economic lives. Although they are seeing house prices continuing to rise and more activity in their workplaces, these are not things that help pay the bills in the short-term.(Store Fixture)
"Add to this the fact that consumer confidence levels are still greatly below where they were before the financial crisis and it is clear why consumers – conditioned to caution – are not yet ready to spend. As a result, although economic optimism is generally increasing, businesses are not seeing the impact at their tills."
The ONS breakdown of growth in the third quarter showed household spending contributed 0.5 points of the 0.8% increase, the fastest since the second quarter of 2008. Investment added 0.2 points and the increase in stocks a further 0.9 points.
But with imports rising faster than exports, net trade subtracted 0.9 points from growth during the quarter.
Stephen Lewis, chief economist at Monument Securities, said: "To the extent that rebalancing of the UK economy is occurring, the figures strongly suggest it is in the wrong direction, towards consumption(Store Fixture) and away from net exports.
"It is far from clear that the pick-up in consumer spending is prompting companies to step up their capital expenditure. Spending on transport equipment, the strongest element in capital outlays over the quarter, is characteristically lumpy and not especially responsive to short-term(Store Fixture) changes in the demand outlook. The UK authorities, however, appear to have long since abandoned their rebalancing goal in favour of stimulating growth, from whatever source and at any cost."
