Wednesday, 7 September 2011
No visits to the shop
The curse of returning to school after the holidays was that essay that had to be written on what you did in the summer holidays. Now if some perverse government decreed that the population had to do the same the one thing that would be missing from most accounts would be shopping.
The British Retail Consortium said that there was a decline in sales (0.6%) in August. This follows a slow spring and summer. Most of us don’t need surveys to tell us this, a walk down any Welsh high street will confirm the fact with the number of shops that have closed.
Now you don’t have to be John Maynard Keynes to know the cause of it. People don’t have or won’t spend their cash. Why? Either they’ve lost or are worried about loosing their jobs or those with jobs have seen that their wages have not kept up with prices. All of these factors have kept the high street quiet.
Economists would describe it as a decline in consumer confidence, high inflation and a squeeze on personal finances, but it amounts to the same thing.
Another sign that the economy is ceasing up, is the recent survey of the UK services sector. The Service sector accounts for about 70% of the economy so what happens to it is important to the country’s economic health. In August the sector suffered a massive decline, the sharpest slowdown since the foot-and-mouth crisis of 2001.
All would indicate that a snail would outpace the UK economy. For it is slowing down rapidly and that much talked about double dip recession is looming.
Economists and many in the City are urging the Chancellor of the Exchequer to act to reverse the slowdown by changing course.
They reckon that the UK and other governments need to agree a global plan for growth with a more balanced deficit reduction plan that emphasizes growth and jobs.
Put simply, the spending cuts agenda of government needs urgent amendment if a collapse in business and consumer confidence is to be avoided.
But the Chancellor has basically lifted two fingers up to anyone advocating a plan “B”. He reiterated as recently as yesterday that he would not be shifted from his plans. Despite having to acknowledge that his already weak estimates of growth will have to be revised down even further in his Autumn Statement.
It is difficult to see how he can succeed in his own objectives of bringing down the public deficit at a time of large unemployment and low growth if he sticks to his current policy. The Chancellor should take note of Keynes advice “It is better to be roughly right than precisely wrong”
No, the Chancellor will have to give us incentives to go back to the shops again and spend. That’s the only way to grow the economy and ironically get the deficit down. So in the mantra of the old pools winner let’s spend, spend and spend.