TANTALISING and frustrating remain the right words to describe the
evidence of retail spending as a sound guide to the extent of the
economic recovery now taking place. The latest figures are good in
themselves, showing the highest year on growth since last spring,
according to the CBI. The less tangible, but no less significant,
business optimism was stronger across all sectors of the retail trade --
with motor traders being especially confident. Yet all involved are
anxious to insist that everything remains fragile. False dawns have
occurred before: several good months of improving retail performance
last year were followed by a return to doldrums. The CBI's head of
economics was quick to point out that it was too early to predict a
''firm upward trend'' in consumer demand.
The CBI thinks it will be June before a clearer picture emerges. By
then, of course, the Chancellor will have had to arrive at a judgment
about how best he can help matters. Anguish must be the right word for
his state. On the one hand the encouraging evidence of consumer
confidence is real but slight; on the other hand there is no doubt
whatever about his need for additional public revenues. If he raises
taxes by more than a nominal amount he could hit that consumer recovery
very hard. It is a measure of good fortune that he can postpone some
(probably most) of any increases until the winter when the extent of any
recovery will be clearer. If the lower interest rates are working to
encourage spending that too will be obvious as the months pass, though
the case for an earlier, rather than later, further cut there is strong.
Other evidence tends to confirm the fears of those who doubt the
strength of any recovery so far manifest. The job losses at Rolls-Royce
may serve as a sad but convenient example of a continuing trend that is
bound to depress enthusiasm for additional spending either from savings
or borrowings. Those who think redundancy might hit them next will hold
on to their cash. Only when unemployment levels out, or better still
starts to fall, will such fears cease to be a drag on popular spending.
That consideration also applies to housing, where two million mortgagees
are thought to have ''negative equity''. That figure may be exaggerated,
but the fact is the housing market is still seized up. Until that
changes, the chance of a retail-led recovery is bound to be slight. More
hope lies with exports, though it too could be misplaced if recession
hits enough of our customers.
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