Statistics are a funny thing as they can misinform just as much as they inform. As David Brent in The Office said “Statistics are like a lamp-post to a drunken man - more for leaning on than illumination.”

Although as an economist I think this is a bit of an exaggeration but it is certainly true that statistics are not always as they seem. Nowhere is this truer than the economic statistics produced by the Office of National Statistics. I am not diminishing the efforts of the ONS, who in my opinion do a fantastic job and are far better than most other national statistical bodies in this world.

It is the interpretation of their statistics that leaves much to be desired. Commentators are all too willing to take monthly figures released by the ONS and other bodies and use them as direct evidence to support one theory, one forecast or one inclination. In fact monthly data is almost always revised in the following months as new evidence emerges. The monthly data is also highly sensitive to various events that occurred that month which are completely unrelated to the wider economic picture. Looking at longer term trends is a much more satisfactory way of interpreting data, even though they possibly lack the spontaneity that a new release provides.

Therefore I am going to comment upon the retail market in December, whilst attempting to avoid the trap of drawing a conclusion from just one month’s evidence.

I am writing this article before the official December retail sales figures have been released, which will be published next week. However given survey evidence and retailer announcements it is clear that the December figures are very likely to show sales increasing sharply compared to December 2008.

So clearly everything is getting better for retailers, right? People are flocking back to the shops and spending their money, right? A great Christmas on the high street is a sign of a great year ahead, right? Possibly, but probably not. As mentioned at the beginning of this article, don’t be misled by one month’s data.

It must be remembered that the sales data for December 2009 will be compared against the distinctly different retail environment of December 2008. This time last year it seemed for many that the world financial system was in free fall with unknown and possibly cataclysmic consequences. Christmas 2008 came very shortly after the collapse of both business and consumer confidence.

December 2008 followed months of sharp falls in retail sales, forcing the government to cut VAT to help stimulate demand. December 2009 came just before a VAT increase. The 2008 cut did not have as big an immediate impact because it provided a year’s window of lower prices, whereas in December 2009 people were rushing to take advantage before that window closed. Therefore when we see retail sales figures showing a large annual increase in month on month retail sales, this is overstating the strength of Christmas 2009.

This is not to be too downbeat. The signs are that December 2009 in itself was better than expected. Some of the retail sales figures released by major stores have seen higher growth than can be attributed just to a relative weakness in the previous year. It is indeed possible that some consumers have decided to spend some of the savings they have built up in the previous six months or took advantage of lower mortgage repayment costs, due to the cuts in interest rates by the Bank of England, to go out and enjoy Christmas.

One should however avoid euphoria. A large rise in sales is excellent but it must be seen in context of sharp falls of a similar magnitude in the previous year, as well as the possibility that temporary factors boosted sales this Christmas, whilst continued weakness of employment and wage growth could depress sales further through 2010.

Up to 2.9%. No worry about interest rates just yet.

Having been through the most traumatic of years it is easy to believe that the worst is over and that 2010 will be uneventful and perhaps even boring. Nothing could be further from the truth. The outlook for 2010 is one of highs and lows, success and failures. Nowhere will this be more obvious than on the high street.

These are the possible highlights of the retail environment in 2010.

December 2009

Despite retail sales falling back in November, sales pick up in December on signs of the recession ending and increased big ticket items purchases before the January VAT hike. Compared to very weak sales turnover data in December 2008, the annual figures show a sharp improvement, masking continued weaknesses within the retail sector.

January 2010

Signs of retailer problems are starting to emerge. Some retail businesses have not benefited from a pick up in sales and are forced to move into administration.

February 2010

Gloom returns to retail as administrations continue and the impact of VAT hikes weigh upon consumer confidence and their willingness to spend. Global equity markets have started to flatten as investment markets question the strength of the recovery. Optimism is fading and retail sales are starting to suffer.

March 2010

Consumers face the distraction of a close and bitterly fought general election. Messages of both hope and austerity confuse retail expectations. The Conservative Party is elected with a small majority, ensuring a workable political environment.

April 2010

An initial boost of optimism following the changing of government gives a temporary lift to retailing.

May 2010

The Conservative Party’s “Emergency” budget and planned tax hikes start to have an impact, taking the shine off the new government. An announcement of substantial cuts to public sector spending and pay freezes increases the prospect of industrial actions. Public sector employees, who have been so far largely isolated from the downturn, start to feel the impact of the recession.

June 2010

The World Cup provides a temporary distraction, as sales of football merchandise; memorabilia and high definition televisions all support higher retail sales.

July 2010

There is mixed economic news. The global economic recovery is regaining pace after a second quarter lull. However, signs of future interest rate hikes in the UK, USA and Euro zone, raise concerns for mortgage holders.

August 2010

A long hot summer increases social tensions. The threat of public sector strikes starts to increase. The disruption is short lived as public sympathy is not forthcoming.

September 2010

Investors return from their summer holidays with a renewed sense of optimism. The private sector is growing in confidence as the recovery starts to build up steam. Unemployment is beginning to fall as private sector job creation compensates for public sector job losses.

October 2010

Rising consumer confidence and lower unemployment is slow to translate into higher retail sales. Cautious spending habits expected to remain for some time. Shops in South Wales benefit from the Ryder Cup, whilst retailers enjoy a weekend Halloween.

November 2010

The first base rate rise by the Bank of England is unwelcome news for home owners, but also provides a positive signs that the economy continues to take tentative steps back to normality.

December 2010

Solid Christmas sales figures but without a significant increase on December 2009. It has been a long year with many ups and downs but most retailers are happy in the knowledge that the worst is over, the economy is growing, unemployment is falling and things are very gradually moving towards normality.

Carl Malways (economist) – writing for The Retail Database

The Retail Database lists the details of all major shopping destinations in the United Kingdom, providing a reference point for everyone interest in retail, from those looking for a place to shop to retailers researching possible store locations.

The CIPS Purchase Managers Index (PMI) was released today, recording a figure of 50.8 in July, up from 47.4 in the previous month. With the PMI index rising above 50 the manufacturing sector is now showing signs that it is starting to grow again, although at a very modest pace.

The manufacturing sector joins the services sector in returning to growth, which recorded results above 50 in both May and June and is forecast to expand again in July.

This should be seen as a positive sign that the economy is now past the worst of the economic downturn and is slowly returning to growth. However, at just above the 50 mark the data is not showing a rapid rebound in activity but a very modest increase in activity. Given that the economy has so far shrunk nearly 6% since the end of the first quarter in 2008, it will take either much stronger growth than this or a very long time indeed to return the economy to where it was in early 2008.

Recent data has also revealed that employment expectations in the manufacturing sector are starting to improve. This is not to say that employment in the sector is expected to grow in coming months, but the rate at which it is falling is set to slow.

Manufacturing in the UK has lost around 150,000 jobs since the start of this economic downturn, but it should be remembered that the sector is in a process of long-term decline. The sector lost jobs throughout the boom years of this decade and since 1980 has seen total employment fall by over 40%.

On the whole, today’s result should be seen as a positive but tentative sign that the economy is starting to improve. The economic environment remains fragile and a smooth transition to normal conditions is unlikely. Nevertheless, should this trend continue, the economic outlook could be better than many economists have been forecasting.

Preliminary GDP data for the UK came in well below analyst expectations today, falling by 0.8% in the second quarter of 2009. Analysts had expected a fall smaller decline of just 0.3%.

It should be remembered that these preliminary estimates do have a habit of being substantially revised before they are finalised, however the magnitude of this fall should be enough to temper some of the more extreme claims that the recession ended some time back in May.

Don't get me wrong, there are signs that the recession is starting to moderate. The 0.8% GDP decline is nothing compared to the 2.4% seen in the first quarter of the year and recent indicators have pointed to continued improvement. However, pulling out of this recession is going to be a long process, and unfortunately a rather painful one. For one unemployment is up by more than 700,000 since the start of 2008 and will continue to rise, even when the economy starts to grow again.

These GDP figures are also lower than the last budget predicted and will mean that the government is highly unlikely to meet its fiscal forecasts. As a result taxes are highly likely to rise and the public sector is likely to experience cuts in funding. This will inevitably mean that jobs will be lost in the public sector, further forcing up employment and destroying one of the last bastions of secure employment.

A probable turn in the inventory cycle as manufacturing businesses, having run down their stocks, restart production and recent economic indicators suggest that the UK economy may return to positive economic growth as early as the third or fourth quarter of 2009. This is indeed possible. However, the road to recovery will not be smooth. The unwinding of fiscal imbalances, a return to a normal interest rate environment and the withdrawal of quantitative easing will be difficult, threatening recovery.

Whatever shape you think the recovery will take one thing is for sure, it will not be easy!

According to the CIPD/KPMG survey of employers' the jobs market in the UK is getting rapidly worse. This should not come as too much of a surprise.

It should be remembered though that this survey is now a bit historic and was undertaken in a period of particularly bad economic and financial market news. I would suggest that this news is slightly redundant (excuse the pun) and we should look to more recent indicators as a better reflection of what is going on.

The survey asks respondents their plans for recruitment and redundancies in the first quarter of 2009. It seems strange to me then that they would release this information on 9 February when we are already half way through the quarter.

"The latest quarterly CIPD/KPMG survey of employers’ recruitment and redundancy plans indicates that UK job prospects are deteriorating ‘at an alarming rate’ while the size of average pay rises is shrinking.

The winter Labour Market Outlook (LMO) survey of 892 UK employers, conducted by Ipsos Mori at the turn of the year, finds that more than one in three (36%) plan to cut jobs in the first quarter of 2009 – double the proportion expecting to make job cuts at the time of the previous LMO survey last autumn.

The LMO records a negative balance of -9 percentage points between the proportion of employers planning to cut jobs (36%) and the proportion planning to hire additional staff (27%). This is the first such negative balance recorded in the five years since the LMO survey began in 2004.

The latest LMO survey also finds that employers intend to keep a much tighter rein on pay increases in the coming months. Those who plan pay reviews expect staff pay to increase on average by 2.6%, much lower than the 3.5% average increase expected last autumn. But as many as one in eight employers don’t intend to conduct a pay review at all in 2009."

Source: www.cipd.co.uk

Unemployment continues to grow across the globe, with no countries remains unaffected by the global recession. In the Unites States the unemployment rate reached 7.2 per cent in December, its highest level since 1992. This followed a loss of almost 600,000 jobs in the month, the largest drop in over thirty years. Unemployment will continue to rise in most countries for the majority of 2009.

Nevertheless for the first time in quite a few months the latest economic data has started to show some glimmers of hope. This is not to say that there has been a dramatic improvement in the global economy, but there are perhaps some signs that the rate of economic contraction is decelerating. Although this means that the economy is still shrinking it could be the first steps towards reaching a trough.

Earlier this week the Purchase Manager Indices (PMI) figures for manufacturing and services showed an improved economic environment in both the UK and Europe. It showed that manufactures were benefiting from lower input prices, whilst those in the UK were starting to be helped by the rapid weakening of the pound. Services in the UK and Europe were also buoyed as lower interest rates and government intervention increased the outlook for the sector.

Later in the week the US ISM survey of non-manufacturing businesses improved for the second month in a row. It indicated that business conditions were improving, despite new orders continuing to fall. The US PMI manufacturing survey also increased in the month. Again both indices were improved but implied further economic contraction.

It should be remembered that these figures are indicating changes in the month, and therefore it is dangerous to read too much into them. It should also be noted that the employment parts of these surveys continue to deteriorate, representing an acceleration of unemployment.

Nevertheless the stage is being set for what will be a long crawl back to positive economic growth. Inflation continues to fall in Europe and the US, giving policy makers the room to cut interest rates further or to use monetary stimuli such as quantitative easing. Falling inflation will also help to boost real incomes, whilst reducing the attractiveness of savings, providing a much needed boost to consumer spending.

On top of this, lower interest rates and rising unemployment will provide benefits to business. Although, banks remain unwilling or unable to increase lending to businesses, there are early signs that the bond market is starting to re-open (although at a high price), whilst some bank facilities have become significantly less expensive. In addition, being able to cut jobs has enabled some companies to reduce costs, increase productivity and adapt to the changing business environment.

A return to normal economic conditions remain a long way away, even positive quarterly economic growth is unlikely in a number of countries until 2010. However, should the latest economic indices continue to improve then perhaps we are seeing a light at the end of the tunnel. The tunnel is likely to be quite long, but now could be the best time to start preparing for the upturn.