The Mixed Messages of June Footfall
The latest Retail Traffic Index™ from research group SPSL reveals that June saw retail footfall rise by 3.0% year-on-year and by 4.4% on May. Shopper numbers over Quarter Two as a whole were up 2.2% against 2006, a reverse of the 0.9% drop recorded for Quarter One. But the underlying message is not quite as simple as it first seems. According to Dr. Tim Denison, Director of Knowledge Management at SPSL and leading retail psychologist; “At first sight June’s figures look remarkably healthy, but we have to bear in mind that June 2006 was a weak month for retail footfall in the non-food sector. England’s matches in the footfall World Cup took centre stage last June and the shops, with the exception of supermarkets and off-licenses, were, as a consequence, quiet. That said, this is the fourth month in a row in which we have reported more shoppers in stores compared to 2006. “What may be more significant however is that for the second month in a row, the weakest sector has been high street fashion. Shopper numbers in June were down by 0.2% against a year ago. Even the early arrival of the summer Sales on the high street has not managed to counter the combined effects of another month of miserable weather with the first real stirrings of a long-anticipated drop in discretionary spending triggered by what must seem to many to be an endless series of interest rate increases. “Generally though, Quarter Two has proven to be stronger than Quarter One, despite the squeeze tightening on the consumer’s disposable income. For months now, many consumers have defied the inevitable and carried on shopping freely. This is despite discretionary spending being at a 5 year low, now standing at just 22% of the average household’s gross income according to Ernst and Young. People seem happy to simply carry on living for the moment, rather than to save for a rainy day. The household savings ratio (the percentage of disposable income left unspent by the consumer) now stands at a 47 year low and most consumers are unlikely to be able to ignore the effects of this indefinitely. “The spate of interest rate rises has failed to change the situation significantly, mainly because they are yet to register on the majority of people’s fixed term mortgage repayments. But it is only a question of time. Even the continued, but apparently slowing, rises in house prices won’t now provide the comfort that they have done of late. “Moving into Quarter Three, I genuinely believe that we are sitting on the cusp of a gentle downturn. Retailers will probably be praying that the pound remains strong against the dollar to help preserve margins on third-world sourced goods, but they should now expect that consumer demand will begin to noticeably weaken. ENDS