UK shoppers are keeping calm and carrying on. Why?

theguardian.com:

The UK economy is a puzzle. Inflation has burst above 10% for the first time since Argentina was gearing up to invade the Falklands in early 1982. Prices are rising far more quickly than wages. Consumer confidence has plumbed depths not seen during any of the many misfortunes of the past half century.

And yet, the official data shows the British public is carrying on shopping regardless. Retail sales were higher in July than they were in June despite the progressively tighter squeeze on living standards. Airports are busy with holidaymakers, house prices keep on rising. Odd sort of crisis, you might think.

One possibility is that the gloom surrounding the economy has been overdone. Unemployment is low and job vacancies are high. People are not fearful of losing their jobs and if they are laid off they can hope to find another one relatively quickly.

Demand for foreign holidays is strong because many households built up savings during the pandemic when spending opportunities were restricted. Those cash buffers are now being drawn down, bridging the cost of living gap left by rising inflation.

Yes, the Bank of England has raised interest rates at the last six meetings of its monetary policy committee, but in real terms – adjusted for inflation – borrowing costs are still low. Put together all these factors and there is a case for saying the UK will experience a relatively mild downturn this winter.

Even the dire state of consumer confidence can be explained away, because a breakdown of the latest snapshot of sentiment shows people are much gloomier about the state of the economy than they are about their personal finances. The wall-to-wall negative reports about a looming cost-of-living crisis has been registered but, so far at