Good retail sales and no shop price inflation

The April retail sales figures were good. Total sales were up 6.3%. The delayed Easter reduced the March figures and flattered the April ones as I argued at the time of the March release. We can now see the underlying pattern, which is still one of decent growth. Food has been stronger than non food, with the BRC itself saying that taking the two months of March and April together food sales “were up by around 4% on last year, exceptional growth by all recent standards”. More importantly, there was no overall shop price inflation, giving the lie to those who have argued rising prices will follow from a weaker pound.

Why haven’t prices risen as some said? There is considerable competition in world goods markets. There is even more competition in UK retail. The main store groups have increased their trading areas at the same time as on line retail has provided formidable competition to them. Discount retailers have kept their prices down, whilst use of the web has enabled shoppers to look around for the best deals especially for the larger items. The pound is now strengthening again, some 8% up on its lows. I do not expect that to suddenly cut prices, just as I did not expect a price surge from the previous falls in sterling.

The construction outlook has also brightened. Recent figures imply good growth in house building coming through, and a quickening of the pace in industrial property. New offices are weaker. Overall the PMIs and the recent starts figures point to a growing industry with more investment in buildings.

It is interesting to note that the FTSE 250 Index of smaller companies with more UK business as a proportion is now up by one third since June 27th 2016, whilst the large companies in the FTSE 100 with more exposure to foreign currency earnings are up by 23%.

Published and promoted by Fraser McFarland on behalf of John Redwood, both at 30 Rose Street Wokingham RG40 1XU


  1. Dame Rita Webb
    May 10, 2017

    No mention of the increased level of personal debt that paid for it all

    1. Edward2
      May 10, 2017

      We are becoming a cashless society. Paying for.things using cards and making contactless card payments.
      All these get added into the statistics for debt.
      Then there is trend for buying cars and vans on monthly payment plans by the majority of buyers.
      It distorts the debt figures.

    2. a-tracy
      May 10, 2017

      Personal debt is concerning, one test we should do is ask every 18 year old, about to leave school, test questions on interest, hp finance, loans, credit cards, mortgages, to see how much awareness there is to how debts rack up on cars, mobiles, computers, studying to try to ensure they have more knowledge than their previous generations seem to leave school with.

      The numbers of people I hear being advised to walk away from their debts, become insolvent, repay at minimum rates etc. is expanding. We’re seen to be a rich Country but it’s a mirage.

      1. Anonymous
        May 10, 2017

        There is no other way for them to enjoy the lifestyle we’ve had and the crash started in 1997 – because of the EU.

  2. Javelin
    May 10, 2017

    One would hope food prices would fall when we leave the EU ad we can import food from around the world without the EU protections.

    1. Bob
      May 10, 2017

      Wine from outside the EU should come down in price once we’re disentangled from the EU protection racket. Same for cars (some non EU cars can even carry a full size spare wheel).

    2. Lifelogic
      May 10, 2017

      Indeed food prices should fall a lot when we ditch the all absurd common import EU tariffs and the red tape. Will assist the developing countries too. Also relaxations on GM crops.

      Energy prices can fall strongly too when we ditch the insane Climate Change Act and similar self inflicted lunacies. Still no warming since 1998 – over 18 years now. How much longer before the establishment actually accept they we rather “exaggerating”?
      Also that their computer model projections were rather a sick & expensive joke?

      1. Bob
        May 10, 2017

        Next you’ll be telling us that the Labour govt were wrong to persuade drivers to switch to diesel powered vehicles.

  3. Roy Grainger
    May 10, 2017

    No John but you see fuel prices are up 5p a gallon which the LibDems say is a very bad thing. The LibDems also say that carbon pricing to force up the price of fossil fuels to stop Global Warming is a very good thing.So, something can be both very bad and very good at the same time. Simple.

  4. Lifelogic
    May 10, 2017

    If we can get May and Hammond to actually set a sensible agenda, post the election. One of lower taxes, cheaper non greencrap energy, real deregulation, relaxed planning and far less government then the economy will certainly boom. They seem however to be set on even higher taxes and yet more government. This combined with economically illiterate price and wage controls.

    Owen Jones on the Daily Politics yesterday was on about house building, saying it was a “failure of the market” to building sufficient houses. Drivel it is a failure of absurd government over regulation. This from over the top planning regulations, over the top green crap building regulations, stamp duty taxes that are far too high, daft restictive employment laws, excessive monopoly utility connection charges, the enforced social housing requirements and these back door planning gain taxes.

    1. Lifelogic
      May 10, 2017

      More absurd & fanciful figures from Jack Dromey Labour’s (let kill jobs and) Business Spokesman, on the Daily Politics just now. Sensible questioning by Andrew Neil but answers came their none needless to say.

      1. Lifelogic
        May 10, 2017

        Politicians always assume that if they increase tax rates in one area people will not change their behaviour and also will pay pay less in tax in other areas! Even then their figures are complete drivel.

        If you increase corporation tax rates then businesses will have less to invest and will employ fewer people – so their will be less NI and Income tax and more benefits due. Or they we more their HQ to say Ireland.

  5. Richard1
    May 10, 2017

    Absolutely pathetic interview by the BBC on the Today programme with Tim Farron. mr Farron asserted that leaving the single market will cost £100bn in lost tax revenues and proceeded to ‘spend’ the money’. The assumption was not questioned or challenged remotely by the BBCs Sarah Montagu. Mr Farron was not asked how the UK could remain in the single market and avoid sending a net £10bn to the EU, exercise any control over immigration or avoid subjugation to EU institutions such as the ECJ. The same inadequate questioning of leftists is seen all over the BBC, eg also by Andrew Marr. Only Andrew Neil and perhaps John Humphrys attempt the same level of scrutiny across the political spectrum.

    1. rose
      May 10, 2017

      John Humphrys is usually no use but Nick Ferrari can be as good as Neil. Then he isn’t on the BBC.

  6. alan jutson
    May 10, 2017

    If the Prime Minister wants to keep energy prices under control perhaps she should allow them to purchase power from the least expensive sources, instead of making them purchase a percentage from the most expensive.
    Perhaps we should not be closing efficient power stations.
    Perhaps there should not be 5% Vat levied on bills.

    Simply trying to cap bills is a nonsensical way to go as it means the Government is responsible for the new rate, which by default is then deemed as acceptable.

    1. fedupsoutherner
      May 10, 2017

      Alan Jutson

      Everyone thought that when the subsidies for wind turbines stopped the developers would stop erecting them. Wrong. In Scotland there are so many wind turbines now and more being consented and instead of farming subsidies they now get turned off on a regular basis because they overload the grid and get paid a constraint payment which is worth 30% more than if they were operational. No wonder they are still scrambling to get on the band wagon and no wonder our bills keep going up.

  7. Bert Young
    May 10, 2017

    Personal debt is a problem and , sooner or later , it has to be brought under control . Some individuals do not seem to care about their spending habits ; they are definitely influenced by the credit card companies .

    It is encouraging that post Brexit referendum the public seem to have disregarded all the threats of doom and gloom from Brussels and from the disenchanted in this country .

    1. libertarian
      May 10, 2017

      Be careful, here. Personal debt consists of a number of things. The biggest normally is ones mortgage. As the price of houses in the UK is so high its no surprise that people borrow more and therefore have a greater “debt”.

      The ONS figures do not include mortgage debt normally but DO include student loan debts.

      Interest rates are at an historically low level so if you are going to incur debt now is the time to do it.

      As far as credit card debt is concerned, I’m sure its quite high, but also bare in mind that we live in an almost cashless society where huge amounts are spent on credit cards , even small amounts for rail tickets, coffee etc on contactless. I spend a huge amount on my credit card every month, but pay it off at the end of the 54 days free credit period, so I’m in fact debt free but included in the monthly figures.

      1. Mitchel
        May 11, 2017

        If the credit card scenario makes the debt appear worse than it is then surely it likewise flatters cash savings in the aggregates.

  8. John Finn
    May 10, 2017

    John – a bit off topic but I have a question related to what I’ll refer to as the Corporation Tax (CT) Paradox.

    In 2010 the CT rate was 28%. In 2016/17 it was 20%. Allowing for economic growth and inflation, we would, therefore, expect receipts in 2016/17 to be almost one third lower than in 2009/10. But they weren’t – they were in fact a bit higher (Note we would expect them to be higher in nominal terms). I’ve thought of 2 possible reasons.

    1. Business closures in 2009/10 meant that a lot of CT didn’t get paid.
    2. There has been a behavioural changes e.g directors taking dividends rather than salaries.

    Reply or 3. Profits have gone up as the economy expands 4. More business and profit takes place here attracted by lower rates

    1. John Finn
      May 10, 2017

      Reply or 3. Profits have gone up as the economy expands 4. More business and profit takes place here attracted by lower rates

      Yes – but receipts have risen as a proportion of GDP. The fact that CT receipts have increased isn’t a surprise. The economy is growing. The fact that the CT/GDP ratio has increased or maintained the same level is a surprise.

      In 2010, HMRC took £28 for every £100 of profit. In 2016/17 they took £20 for the same £100 profit. £100 profit in 2010 pay £28; £1000 profit in 2017 pay £20 – the ratio is still 0.28 v 0.2.

      OK – it’s possible corporate profits have risen at a faster rate than GDP. That would explain it.

    2. Richard1
      May 10, 2017

      Good post. In a further biased idiocy this am on the BBC a BBC economist endorsed the Labour Partly’s claim that an increase in CT will produce higher receipts, unless I misheard. The reduction in CT rates, like the reduction (and earlier increase) in CGT rates are an excellent illustration of the Laffer Curve effect.

    3. libertarian
      May 10, 2017

      John Finn

      Your point 2. Dividends are paid out AFTER CT and income tax is levied on dividends at a higher rate than CT tax normally

      1. John Finn
        May 12, 2017

        Your point 2. Dividends are paid out AFTER CT and income tax is levied on dividends at a higher rate than CT tax normally

        I know. If have a company which has annual profit of £100k . I have a number of options. Two being (1) Take all of it as a salary and pay tax and NIC – but NO Corp Tax. (2) Pay Corp Tax and take the rest as dividends.

        In (1) CT receipts will be down and IT/NIC up. In (2) CT up and IT down.

  9. Antisthenes
    May 10, 2017

    No doubt the vote to leave the EU is contributing in some measure to the continuing economic good news. People may not understand why they are feeling less constrained in consuming and producing more. In part it may just be a subconscious feeling that one of the burdens of life, being smothered by the bureaucratic and tyrannical embrace of Brussels is soon to be lifted.

    There is nothing more motivating than the thought of being able to exercise free will again. EU technocrats and progressive socialist would do well to bear that in mind as they pursue their aim of imposing their visions, dogmas and ideologies on the rest of us whilst at the same time stifling opposition. Unfortunately all good things come to an end eventually and whilst the feel good factor will grow as Brexit progresses and exit comes closer to reality the as yet untamed boom and bust cycle will continue on it’s inevitable course.

    1. Mitchel
      May 10, 2017

      There is an utterly,utterly brilliant article by John Gray in the current issue of the New Statesman -“Fellow travellers & useful idiots-western apologists for the Soviet Union believed they were in the vanguard of history”which starts with the Soviet Union but traces the arc of the fellow traveller and useful idiot to Nazi sympathisers, Trotskyite neo-cons in the USA,the EU and Islamism

      “The principal goal of the fellow-traveller has always been to sustain their own sense of having a special place in history.The millions whose lives were destroyed in the course of grandiose political experiments that led nowhere served a cause of which they were unaware – keeping up the spirits of the western thinking classes”

  10. Anonymous
    May 10, 2017

    The economic cliff edge never mentioned is the one brought by the EU before the referendum. Bank of Mum and Dad had to step in.

    Children are broke compared to their parents:

    – tuition fees
    – house prices/rents
    – car insurance

    I’m astonished most young people are EU voters with the pressures on resources.

    1. rose
      May 10, 2017

      This, to me, is the greatest mystery about the referendum – if it was true that young people voted to stay, and not just propaganda. Old people have had their jobs – some still have them. Old people have their houses – some have two. Old people managed to save a bit, albeit the government has been confiscating it in various ways. Old people managed to get into maternity wards when they needed them.

      So why is the generation which would have been fighting half Europe for a job in a coffee shop; which hasn’t got anywhere to live and has to stay with parents; which can’t get down the streets or pavements; which can’t get into maternity wards; etc; so angry about their parents and grandparents trying to do something about it?

      1. Martyn G
        May 10, 2017

        The UK having been in the EU for 40 years, I suspect that it is simply that they know nothing about how life was in the UK pre-EU vote to join and unlimited immigration.
        I also suspect that when we oldies tell them about how it was before we joined the EU, they think we are telling them fairy tales typical of old folk stuck in past.

    2. Mitchel
      May 10, 2017

      “Children are broke compared to their parents”

      Well,yes,in a lot of cases.But how much of that is down to the EU and how much down to the wider economic system which,through financialisation of every conceivable thing to boost GDP, requires if not state assistance then the free and easy availability of debt to sustain it – with dependency the result.

    3. Bob
      May 10, 2017

      “I’m astonished most young people are EU voters with the pressures on resources.”

      If that’s true, I would put it down to naivety and indoctrination through the education system.

      Also, the kids are very much influenced by celebrity, and the BBC can make or break an entertainment career.

  11. Denis Cooper
    May 10, 2017

    It’s still a matter of “So far, so good”. We voted to leave the EU without that precipitating an immediate recession, which some predicted, and now the government has sent in the Article 50 notice without that having any discernible economic impact, but the conditions for our withdrawal from the EU have not yet been settled let alone come into effect.

    Personally I remain sanguine about the likely economic effects of leaving the EU, including its famous single market, simply because joining had only marginal economic effects. As pointed out repeatedly before the referendum, the pro-EU faction in the UK have made a longstanding habit of vastly exaggerating the economic benefits of EU and EU single market membership, when the EU Commission itself estimates that creation of the single market added only about 2% to the collective GDP of the member states, while one study suggests that the benefit for the UK has been only about half of that average. This is in comparison to a trend growth rate of the UK economy of about 2.5% a year.

    My view has been that it is that very marginal economic impact which explains why neither joining the EEC, nor our later participation in its single market, had any discernible effect on the growth of the UK economy, and now I have read of a new book which has incidentally come to much the same conclusion:

    “Was Europe ever worth it?”

    “The authors scrutinised the performance of the British economy over the past 64 years, to find the factors that hampered or boosted growth. And EU membership was not one of them … no matter what variable or model … they cannot see how joining the European Economic Community in 1973 made a lick of difference to growth rates.”

    And moreover:

    “… another, equally striking claim: that EU membership hasn’t been that great for anyone else, either … For 20 out of 28 member countries, growth actually dipped after joining rather than rose. And with the exception of Ireland and Luxembourg, those eight exceptions were all post-Soviet economies with significant “catch-up” gains to make.”

    There is a caveat here, that even though any economic gains of EU membership have been very slight the short term losses from a disorderly departure could be greater:

    “… to claim that Britain has not gained from the Single Market is not the same thing as saying that we will be unscathed if we leave it. While it may not have changed the size of our economy much, it has certainly altered its shape … ”

    So obviously we would prefer a smooth and orderly withdrawal, but failing that it would not take the UK economy long to recover from any losses.

    1. margaret
      May 10, 2017

      As always Dennis your comments are informative. Two questions though
      1) What does everybody mean by a smooth exit.
      2) How long is not long for recovery say after a snap impatient exit?

    2. rose
      May 10, 2017

      Does your book cover the effect of increasing the population? We always hear of the GDP being 5th in the world and the inference we are to draw is that the EU has enriched us; but we never hear that the GDP per capita is 35th according to some calculations. Of course bringing in extra millions increases the size of the GDP but that is not the same as enriching us. In fact we are a great deal poorer now that we are so numerous, but it isn’t fashionable economics or politics to admit it.

  12. Glutton
    May 10, 2017

    Top brands have had an easy passage until recently. Shoppers had trust in recognised brands. But many of these brands changed the nature of their product with little warning but more a triumphant “New” “Improved” ” Old recipe” “Traditional”.
    # Chocolate… has deteriorated considerably across the board. It is a sick joke compared with what it was.
    You can understand companies wishing to cut production costs. But now smaller companies are able to produce the “new” mediocre product without expensive infrastructure.
    Great Brand Names deserve to go down. They broke the trust of their customers. If I must drink canned soup for example, I find “unknown” brands have better genuine content, taste and are much cheaper. The labels are not as pretty though.

  13. MikeP
    May 10, 2017

    Yet BBC News are leading with Toyota profits down and Talk Talk shares down. So frustrating to have such doom merchant as our national broadcaster

  14. norman
    May 10, 2017

    LL: “Indeed food prices should fall a lot when we ditch the all absurd common import EU tariffs and the red tape. Will assist the developing countries too. Also relaxations on GM crops.”
    I would be very wary of opening the flood-gates to GM Crops. Very wary indeed! I saw many modern progressive trends in agriculture in my career in the government service, and some of them had disastrous consequences for animal and public health, which took decades to rectify. It should have been a no-brainer NOT to feed ‘clean’ animals like cattle on dried poultry manure, or the minced up remains of other animal protein, or to over- industrialize poultry production. I have seen two former Defra ministers on TV scoff that anyone could object to GM. Well, I believe by the time they find out they were wrong, it will be too late.
    Not everything is solved by a free-for-all approach – we need balance – something that human nature seems to find almost impossible. Yet in the end, its the best way for everyone’s peace of mind. And you can’t put a price on that.

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