The world’s three most watched shoppers handed in their August receipts this month, and they could not have told more different stories.
America spent like someone who had just been paid. Britain spent like someone who had checked their balance first. China barely opened its purse. If you want to understand where the global economy is heading, you could do a lot worse than reading these three receipts side by side, because consumer spending is the engine room of every one of these economies. In the United States alone, it makes up roughly two-thirds of the whole thing.
Three receipts, three moods
The American figures landed first, on 16 September. The Census Bureau reported that retail and food service sales reached $773.9 billion in August, up 1.2 per cent on July and 6 per cent on the previous year. That came the same week the Federal Reserve raised interest rates; this tells us how little the American shopper waited for permission.
Britain followed two days later. The Office for National Statistics said sales volumes rose 0.5 per cent in August; this neatly undid the 0.5 per cent fall in July, and 2.4 per cent higher than a year before. Respectable, steady, and very British. One polite step back in July, one step forward in August.
China was the quiet one. Its National Bureau of Statistics reported retail sales growth of just 0.4 per cent on the year, below the 0.8 per cent economists had expected and slower than July’s 0.6 per cent. Cars and household appliances were among the weakest categories. For an economy of that size, 0.4 per cent is not a shopping trip. It is someone walking in, looking around, and walking out again.
Read the small print on the American number
Here is the part most headlines skipped. The American figure is measured in dollars spent. It is not adjusted for prices. Britain’s headline figure is measured in volumes, which strips out price rises and counts what people actually carried home.
That difference matters more than it sounds. When prices are rising, a 6 per cent jump in spending can partly mean people paid more for the same basket rather than filled a bigger one. I wrote about this gap between the number on the chart and the number at the till in Why Life Still Costs More When Inflation Falls, and it applies here too. A big spending number is not automatically a happy one. Sometimes it is just an expensive one.
Even after accounting for rising prices, American shoppers were still buying more. Just not 6 per cent more.
Why the Chinese shopper is holding back
China’s problem is not that people have no money. It is that they do not feel confident spending it. Years of weakness in the property market have hit the asset that holds most Chinese families’ wealth, and when your home is worth less than you thought, you stop treating yourself.
China’s own statistics bureau has acknowledged the imbalance, noting that supply remains strong while demand stays weak. Analysts such as Zhiwei Zhang of Pinpoint Asset Management have pointed out that government support takes time to reach ordinary households, and that consumption and investment remain soft even while factories keep humming. In plain terms, China is making plenty. Its own people are just not buying enough of it.
That matters well beyond China. When the world’s second-largest economy saves rather than spends, its factories look abroad for customers, and the rest of us feel it in prices, trade tensions and company earnings.
The one thing all three agree on
For all their differences, the three receipts share one habit. The shop has moved into the phone.
In Britain, online spending reached 28.8 per cent of all retail sales in August, up from 28.4 per cent in July. In America, sales by online and other nonstore retailers rose 2.6 per cent in a single month and nearly 10 per cent on the year, faster than almost anything else on the list. Even in sluggish China, online sales grew 4.6 per cent in the first eight months of the year, against 1.1 per cent for retail as a whole.
Wherever you live, the high street is no longer the main event. It is the showroom. The checkout is in your pocket, and it never closes.
What I take from it
I watch these monthly figures because they are the closest thing we have to a live reading of how ordinary people feel. Not how economists feel, or how central bankers feel, but how the person in the queue feels when they decide whether to buy the thing or leave it on the shelf.
I don’t read one month as a trend. August was one month, and July said something different in two of these three countries. I look at the direction over three or four readings, check whether the number is measured in money or in volumes, and ask what it means for the companies I already follow. A retailer with a strong online business looks very different against these numbers than one that still depends on footfall.
Three countries, three moods, one lesson. Before you celebrate a big number, check what it is actually counting.
This is not financial advice, just how I read the receipts.
The Jacqueline Brand — knowledge builds confidence, and confidence builds wealth. This is editorial commentary for information and education only. It is not financial, investment or professional advice, and nothing here is a recommendation to buy or sell any investment. The Jacqueline Brand is not authorised or regulated by the Financial Conduct Authority. The value of investments can fall as well as rise, and past performance is not a guide to future returns. Figures were correct at the time of publication. Always do your own research and consider speaking to a regulated adviser. Where cryptoassets are discussed, they are high risk and largely unregulated in the UK, and you could lose all the money you invest. The Collection
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