The boom in retail sales forecast for the current year has definitely failed to materialise. In the first three quarters in 1976 the volume of sales was down by 3% on the level of a year ago, and some areas, such as food retailing, where sales could end the year down 4 or more percentage points, have been major casualties of the squeeze on consumers' real incomes. Although the Government's pay norm of 10% started life as a fairly wishy washy attempt to restrain wage inflation, a tough line has been maintained on what is still a non‐statutory and voluntary agreement. There is every chance, now that the power workers have been routed, that the 10%guideline may stick for large sections of the working population. Where, then, is the rise in retail sales going to come from next year? The evidence is that the consuming population has reacted to wage restraint by simply cutting down. This is particularly noticeable in the food sector, where volume has sustained a heavy fall, where there has been much trading down, and where Tesco appears to have made the right move in ditching Green Shield for lower store prices. Clothing and footwear sales have not been good; a non‐summer this year clearly did not help, although the promised hard winter after several years of mild weather might help sales this time around. Sales of durable goods have been poor, and this is hardly surprising in a situation in which consumers, far from contemplating major capital investments in washing machines and carpets or furniture, are arguing over which brand of baked beans is the cheapest. So this is altogether a rather gloomy picture —but relief is at hand in the form of the latest round of tax allowance uplifts that should (the Inland Revenue willing) hit pay packets and the shops in time for Christmas. This means that retailers who rely on Xmas sales for a good proportion of their profits (department stores, Boots, WH Smith) will be making merry this year. But one theory is that the extra cash will be used to buy smaller items — extra drink, food and presents, rather than for fuelling any increase in larger items of expenditure. Latest monthly figures from the Department of Trade show that retail sales for both September and October were below the levels for 1976. In September the volume index was down from 108.9 to 106.2 while in October it fell from 108 to 106. The savings ratio —the best barometer outlook remains at an all time high. This is where the consumer boom next year will come from. The only question is —will consumers be that much more confident after the turn of the year? Over the last few months the strength of sterling and the appro‐val of the UK's international creditors has helped to boost confidence —and led to the government talking out loud in terms of ‘turning the corner’. There must be a huge pent up demand for consumer items. It is possible to envisage a consumer boom from next summer despite the 10%wage restraint. If people were confident enough in the future of the economy, they would start spending their savings instead of stuffing them into the building societies. Obviously the current high level of unemployment is not good psychologically for such a boom. On the other hand, lower factory gate prices (and smaller increases in imported food prices following the strength of sterling) may lead to something close to a real increase in disposable income even on the basis of a 10% norm wage rise. Some areas that are sensitive to future spending trends, or rather to consumers' feelings about those trends, such as mail order, are doing quite well at present.
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