Viv Nicholson, those with long enough memories may recall, won what was then a small fortune on the football pools in 1961. Asked what she was going to do with the money, she replied: “Spend, spend, spend.” Which she duly did until there was nothing left.
The latest official retail sales figures show that the spirit of Viv Nicholson lives on among Britain’s shoppers. Moreover, the spend, spend, spend mentality will be what prevents the economy from sliding into recession, at least for now.
To be sure, there were a couple of special factors that explain why spending, after a bumper June, was again solid in July. It was the time summer made a brief appearance and there were some juicy online deals that consumers could not resist.
That said, though, there are underlying reasons why spending is holding up. Employment is at record levels, unemployment is close to its lowest level since the mid-1970s and wages are growing faster than prices. When people are in work and their real incomes are rising, they tend to spend more.
So how does this square with the idea that the economy, after shrinking by 0.2% in the second quarter, will contract again in the third and so fulfil the technical definition of a recession?
The simple answer is that it doesn’t. Businesses are certainly full of anxiety about the terms on which the UK leaves the EU, which is why investment is so weak. But the evidence suggests that consumers are not spending every waking hour fretting about Brexit. And that means the economy is likely to grow modestly in the third quarter.
That’s not to say that retail sales – which account for about 30% of total consumer spending – will be unaffected if on October 31 Britain leaves without a deal. In those circumstances, there would probably be a wave of stockpiling in the lead-up to Brexit day followed by a period of retrenchment.
If – and it is a big if – the chaos is less severe or less prolonged than expected, consumer spending may quickly bounce back, particularly since tax cuts, public spending increases and lower interest rates would all help support the economy.
But clearly a no-deal Brexit increases the chances of the economy contracting in the fourth quarter. And, given that November and December are the busiest time of the year for retailers, it is easy to see why they await 31 October with some trepidation.