‘Revenge shoppers’ are just what retailers need this week

This is the week for “revenge shopping”. At its crudest it is venting our fury about the state of the world by buying stuff. More thoughtfully, it is using some of the financial firepower built up over the past 18 months to make for a less gloomy holiday season. If we are not able to spend money on partying or foreign travel, then we will spend it on things we can enjoy in the home.

The background is widely appreciated. The two industries hardest hit by the Covid-19 pandemic are indeed hospitality and travel. Here in the UK uncertainty over omicron has led to a slump in restaurant bookings according to OpenTable, and in hospitality jobs on offer according to Adzuma. As for travel, there has been a string of people cancelling their flights at Heathrow as a result of business people fearing they might have to quarantine if regulations tighten further. So in November numbers going though the airport were only 40 per cent of pre-Covid levels, despite the US opening up to British and European travellers.

But if people cannot spend as planned, they can do two things. They can save the money, or they can spend it on something else. As far as savings are concerned there was more than £150bn of so-called excess savings in the middle of this year, and while the savings ratio had come down from lockdown peaks to 12 per cent of national income that was still the highest since the middle 1990s. We will get more up-to-date numbers just before Christmas, but meanwhile the message remains that taken overall, people are still saving at a historically high rate.

But that has not stopped people spending. Far from it. We will learn the impact of Black Friday and Cyber Monday on retail sales this coming Friday, when the official figures are published, but in October retail sales were already running 5.8 per cent above February 2020 when the pandemic struck. And according to Barclaycard, credit card sales in November were up 16 per cent year-on-year. That is in money terms, not volume, and remember that people are ordering Christmas stuff early because of fears about delivery problems. But it is still a blisteringly strong number.

So what will be the economic impact of all this? It is obviously very good news for the retailers, certainly online and probably (though that is less sure) the high street too. There is a further imperative, inflation. If something is going to cost at least 5 per cent more next year, common sense says buy it now. Our retail price index is already up 6 per cent year-on-year, and is expected to go higher. In the US the latest consumer price index was up 6.8 per cent on the year. Revenge shopping makes sense. Add to that the fact that supply-chain shortages push up prices, and there is a double incentive to buy goods now rather than wait.

Shoppers in the UK and US are not yet in the position of those in Argentina, where inflation was 42 per cent last year. But we can learn from countries like that on how consumers react. Bloomberg carried a column this week on what happens there. The first thing to do is to spend your monthly salary the moment it lands on your bank account. Next, borrow as much as you can if the rate of interest is below the rate of inflation. Third, keep the pressure up on your employer to at least match any increase in prices with higher wages. Four, buy any assets that are linked to inflation. And finally, buy homes and consumer durables including cars.

Long term, a surge in inflation is troubling for many reasons, not least the social damage it does by rewarding those with assets that go up in value and hitting those that don’t. It may be great for homeowners, but it is catastrophic for would-be home buyers. Short term, however, a bit of inflation encourages people to buy early and through this holiday season that will jack up an otherwise sombre economy.

The high street retailers could do with some good news. Revenge shoppers are just what they need this week.