Concurrent versions of truth and reality?

Wednesday 3rd May 2017

Concurrent versions of truth and reality?

Nobody knows anything. Not for sure.

How can they, when so much conflicting information from a never-ending supply of sources serves only to obscure and confuse?

Take recent reports of retail sector sales figures, for instance….

Sounds dull. Something only the pointy-heads can get excited about. But this is important and illuminating information – or at least it ought to be.

Not just because the figure tells us something about how well or not the retail sector is doing….

But because it tells us something about the current behavior of consumers – and what they are choosing to do or not do with their money….

That, in turn, tells us something about what the economic road ahead might look like. And it is useful to be forewarned and forearmed against what is yet to come down the pike….

  • Conflicting stories….

The Office for National Statistics said recently that retail sales posted their biggest quarterly fall in 7-years during the first quarter of 2017….

These figures suggested that consumers were drawing their horns in and tightening the purse strings – worried by rising prices, stagnant wages and political uncertainty. The figures suggested a slowdown was on the cards.

Now the Confederation of British Industry’s monthly retail sales balance comes along and tell us a completely different story.

Its retail sales index spiked to +38 in April from +9 in March – the biggest increase in sales volumes since mid-2015.

And the CBI report that their figures didn’t even take the busy Easter holiday period into consideration – and that the real figures should be stronger still….

What all this suggests is that consumers are out there in volume on the High Street, in the supermarkets and on the retail parks, buying lots of units of stuff and spending their hard-earned cash like there’s no tomorrow and very little left of today….

And that retailers have rarely had it so good in recent times. With consumer activity at levels the CBI suggests, it is a wonder shops and stores ever close their doors at all. Every minute with the ‘closed’ sign in the window is a missed opportunity to make sales to rampant householders with money to burn….

  • Flat spell or boom time?

So, to recap, depending on which figures you choose to believe, retailers are suffering a real flat spell or they are enjoying a boom-time….

Depending on which numbers you choose to put your faith in, consumers are worried and anxious and hanging onto the pennies with a vice-like death-grip or they are happy-as-Larry, full of the joys of spring and spending money like water….

Depending on which institution’s conclusions you choose to take onboard, there are black clouds overhead or the sky is duck-egg blue.

Side with the ONS and you can expect an economic slowdown on the road ahead. Go with the CBI, and it’s all going to be honky-dory – time to crack out the cigars….

Confused? Me too.

  • Concurrent versions of the truth….

If numbers and measures and indexes and all the paraphernalia and tools in the economic analyst’s kit are designed to help express a deeper reality, to tell a truth and state a certain and fixed position, then at least one set of data we are looking at today has failed….

That, or there are two concurrent versions of the truth. A state of being that enables us to believe everything and nothing simultaneously – a bit like Tony Blair’s brand of ‘third way’ politics….

The economy is speeding-up and slowing-down. Retailers are enjoying boom and facing bust.

Consumers are buying more and spending more whilst spending less and buying fewer things….

An economic slowdown is ahead of us. At the same time, we are leaving that slowdown behind and watching it get smaller in our rear-view mirrors. That same slowdown can be delayed or avoided completely – but we must understand and accept that it is also inevitable.

This is what the ONS & CBI figures are saying when looked at in conjunction. Clearly, both cannot be right. Somebody has got it wrong….

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  • Somebody got it wrong….

Somebody’s research is off. Somebody’s calculator is misfiring. Somebody’s software has a glitch. Some human eye has read things wrong.

If you want my steer, I’d be putting my money on the fault-line being discovered at the CBI.

Not that I have any working knowledge of the CBI. I certainly have no axe to grind with them. It’s just that digging a bit deeper into the figures they produce and looking a bit more closely at their latest retail sales figure announcement, it’s relatively easy to start feeling doubt about their take on things….

For a start, their index figures are based on a survey of just 57 retailers. That’s more retailers than I talk to in an average week, but in the wider scheme of things it represents a narrow cross-section rather than a comprehensive covering….

I’m also mindful that the CBI’s monthly figures have been volatile of late. Up and down – with big swings….

Indeed, even the CBI themselves seem a little unsure about their figures. Even as they made their latest announcement, CBI analysts were quick to put retailers back on the defensive.

They predicted that retail sales would fall next month and that their index would likely drop to +16. In other words, April might be a blip or an anomaly.

That projected drop from April’s +36 back down to +16 only serves to highlight the volatility of the CBI index….

And when figures are liable to such violent and repeated short-term fluctuations, you wonder how accurate they can be at any one point in time.

  • Signs of distress….

I’m also mindful of signs of distress in the retail sector that serve to contradict the latest CBI figures….

Retail employment levels are falling very steeply right now….

The British Retail Consortium (BRC) reports that full-time jobs in retail fell by 3.9% on the year in the first quarter of 2017….

And that total hours worked by UK retail workers in the first quarter fell 6% compared to the same period in 2016….

14% of UK retailers surveyed by the BRC expect to cut their workforce over the next 3-month period. None of those asked last year had that expectation. Only 7% of retailers expect to take on staff this quarter – compared to 8% of those surveyed last year.

Rising prices and competition from online retailers are taking a toll. The shedding of staff and a sharp reduction of hours doesn’t paint a picture of a sector that is thriving. Quite the opposite.

If I had to take one set of figures over the other, I’d take the ONS figures over the CBI figures. I’d conclude that consumers are spending less and retailers are struggling – which suggests slowdown ahead.

But I can’t know for sure….

  • Nobody knows anything….

Nobody knows anything. Not for sure. And I hijack this latest instance of confused numbers in the media to re-affirm the point.

I have made the point previously – and repeatedly. I will do so again. Because it is important.

In our attempts to understand what is going on around us, we are hostage to the information food chain. We are reliant on what we are told.

Of course, we also have our own observations to call on. But those are limited to our immediate environment and what we experience as individuals. Our own observations can tell us only so much. They paint only a partial picture.

The rest we must get from official sources, learned institutions, regulatory organizations, newspapers, experts on TV, radio, second-hand reports, websites, newsletters and the opinions of folk who think they do know what is going on….

They don’t. Nobody does. Not for sure. That’s the only thing you can know for sure.

You don’t hear everything. You only hear so much. Perhaps only a fraction of the whole. And plenty of that which you do hear cannot be relied upon as a certain reflection of truth or reality….

That’s how it looks from here….

I’ll be back with more next Tuesday.

All the best,

Dave Gibson

Money Truths