Meanwhile, in the real world...

Do consumers know something financial markets don't? That's the question raised by today's figures, showing that high street spending is much stronger than economists expected.
The value of sales grew 6.6% in the 12 months to February, the biggest annual increase for six years. Seasonally adjusted, the  volume of sales has risen 2% since December. And before seasonal adjustment, sales rose by 1.7% in February, the third best February since records began in 1970.
This isn't just because of higher spending in food shops;  sales volumes by non-food stores have risen 1.2% in the last two months and 5.2% in the last 12.
Now, if you believe in the wisdom of crowds or in the permanent income hypothesis, this indicates that consumers are confident about their economic future. It seems they aren't spooked by higher food prices and utility bills - perhaps because they had reined in spending in anticipation; sales volumes stagnated between September and December.
Perhaps, instead, consumers are looking at the fact that their bank deposits are equivalent to over a years' after-tax income; low unemployment; and high profits, which are usually a portent of employment and real wage growth. They're spending because things aren't nearly so bad as the City's panic would have us believe.
What other explanations could there be? City economists are scrabbling around for excuses.  February's unusually bright weather got people into the shops. And the early Mothers' Day also inflated sales, as folk bought harps for their mams.
There's something in these. But they don't fully disguise the important fact - that the real economy is in far better shape than the financial one - something which many "experts", funnily enough, aren't keen to point out.

Comments

[Quinn]

"City economists are scrabbling around for excuses. February's unusually bright weather got people into the shops. And the early Mothers' Day also inflated sales, as folk bought harps for their mams."

Just a personal note. My brother works for a car hire firm, an industry not normally associated with Mothering Sunday or good weather. He said he has been mad busy since the turn of the year, busier than normal. I wondered if this was down to the management buyout his firm was undergoing, but he stated it was solely down to the increase in business going their way. Now perhaps they are just being a successful in their field, but perhaps the slowdown is being a little over-egged.

[kinglear]

I think the problem is within the amounts of tax that the City pays. One would have to assume that this is going to be massively less this 12 months, and perhaps our Leaders are spinning all this to show how it's nothing to do with them that OUR taxes are going up.The real economy ( in Scotland at any rate) is not showing signs of cracking, but, of course, the previous property crashes were not overnight but a searing long drawn out experience over several years, which may yet happen.

[David Barrie]

There's a lot of talking things down just now to speculate up - maybe this is what's going on. The financial markets have a great, if worrying slap-happy phrase for it: 'trashing and cashing' or 'trashing and pumping'. *:-o

[Glenn (aka angry economist)]

You're right Chris - its another case of journalists and others portraying the stock market as THE ECONOMY. When it really is not an accurate reflection of it.

Also I guess we are underestimating the progress in the UK economy over the years, and that there might be more resilience there.

And doom and gloom makes much better headlines than "UK economic growth declines very slightly, but nothing much happened."

I can't see much price inflation on the high street. I always look on the internet for the keenest price now. There's such a lot of competition in retail these days.