A brave stab at optimism

The Confederation of British Industry's sales data for July looked promising. But in reality, the numbers were as dire as usual, says Merryn Somerset Webb.

You could, if you wanted, put a good gloss on the Confederation of British Industry (CBI) sales data for July. The FT had a go, noting that "shops reported one of their best months in a year", and suggesting that "punters appear to be returning to pubs".

But in fact the numbers are as dire as usual. Sales volumes fell for 47% of stores in the survey and rose for 32%. That's a balance of minus 13. Better than June's 17 and the best number since last June, yes. But still a figure that represents a big fall in overall sales, despite the boost retailers got from the mini-heatwave at the start of the month.

I wouldn't call that good news. Instead, I'd compare that minus 13 to the long-term average for the survey of plus 18 and call it pretty awful. Note too that 'the punters' weren't actually drinking more beer. All that happened is that the rate at which they were drinking less declined: in-pub beer sales fell by 4.5% year-on-year in July (again despite the heat wave).

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I'm still hearing a lot about the V-shaped recovery. But look at numbers like this and it's hard to see how so many people can have so much faith in it. As we may have said before, a slowing rate of decline isn't the same as a real rebound. I'm still betting on a gently sloping L-shaped recovery.

Despite the stockmarket's splendid summer run, I still expect a nasty pullback in the autumn, when holiday moods wear thin and what Tim Price refers to as the "Next Leg of the Crisis" kicks off. Remember that cost cutting can only help corporate profits for so long. There are more nasties waiting in the wings for the banks potentially vast credit-card defaults, for example. The stockmarket recovery may look like a V now, but I suspect it'll look more like three-quarters of a W before the year is out.

The same goes for the housing market. Prices are still having the little summer bounce we predicted a few months ago, thanks to a small number of cash-rich buyers edging back into the market, but we can't see it lasting. Come autumn, newly overconfident sellers will pour in, easing the current mini-supply squeeze and knocking prices down.

Think we're wrong on this? Want to bet on it? Well, you can. Online betting firm CityOdds is introducing a betting platform that lets you trade the Halifax House Price Index. If you don't fancy risking your own money, you can enter their Prediction Competition. Log on, sign up and place your bets on where house prices (as measured by Halifax) will be in June 2010. The winner on the official release date gets £1,000. That won't buy a house (even if the most bearish predictions of the MoneyWeek property roundtable come true), but it might make you one of the few people around confident enough to hit the shops next summer.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.