Encouraging high street numbers should be kept in perspective | Ian King

A couple of swallows do not make a summer.

That is the very heavy caveat which must be applied when asking whether, because Next and B&M fared better than expected over Christmas, the retail sector as a whole has done.

A further caveat to be applied is that Lord Wolfson, the chief executive of Next, is a past master at managing market expectations.

The longest-serving chief executive of a FTSE-100 company, he has downplayed his hopes for festive trading during many past Novembers, only to surprise on the upside come January.

Some encouraging signs

That said, the numbers are hugely encouraging, particularly in view of the silence that has been heard elsewhere around the high street.

For more than a decade, retailers have been under increased pressure from the listing authorities to publish any unexpected news around Christmas trading, lest a false market be created.

Accordingly, were there to be bad news out there, one would have expected one or two unscheduled trading statements by now.

The London Stock Exchange is now into its third day of trading in 2023 and, as yet, there have been no profit warnings.

Overdoing the pessimism?

That plays into the idea that a lot of media and City commentators were overdoing the pessimism going into Christmas.

As Simon French, the chief economist and head of research at the investment bank Panmure Gordon, noted this morning: "First few UK festive trading updates (Next, B&M, Greggs) painting a picture that doesn't fit narrative of doom and gloom. In our 2023 outlook we noted regressive nature of staples inflation would generate some incredibly difficult hardships - but may not be reflected at macro level.

"Very early days - and entirely possible a new year hangover kicks in - but strong aggregate household balance sheets, behavioural adaptations and high [job] vacancy rates have been drowned out amidst distributional/political angst at type of economic outcomes being generated."

In other words, households are far from done with running down the savings enforced on them during the COVID lockdowns.

Mr French points out that household savings remain £135bn higher than they were during the pre-COVID era. Clearly, not every household will have that cushion of savings, but the chances are that the solidly middle class market served by Next will do.

Raising wages outpace by inflation in some areas

It is also worth bearing in mind that, for those in work, wages are rising at levels not seen for a decade if not longer. Not enough to keep up with the headline rate of inflation, of course, but certainly in some categories they are.

According to the Office for National Statistics, regular pay - which strips out bonuses - rose by 6.1% from August to October last year, the latest period for which figures are available.

Anecdotal evidence suggests wages have continued to grow at least at that rate since.

Meanwhile, figures released yesterday by the British Retail Consortium on Wednesday suggest that