I made jam tarts the other day. I’m not really sure why. I’ve never done it before. When I mentioned it to a friend, she said that she, too, now finds herself making sponge cakes. And my sister? Tray after tray of bran muffins.
We all agree that baking is satisfying and are pretty sure that we’ll be keeping it up as a sort of hobby (to the extent that working mothers can have hobbies).
This won’t surprise the nation’s food retailers. Having sat through a long decline in the sales of baking goods for some time, they’ve now reported sharp rises in sales of everything from food processors to flour and baking trays. The same goes for canning and freezing products.
It probably won’t surprise recession watchers, either. Along with blips up in make-up sales, rising sales of sewing machines and (in the US at least) a boom in the sale of gun permits, this renewed interest in home cooking has become one of the symptoms of collapsing consumer confidence.
It is a collapse reflected in the official statistics. Numbers from the British Bankers Association show that lending to homeowners by UK banks rose at its lowest rate in nine years last month (due to people repaying mortgages), while the value of overdrafts and outstanding loans fell at a record rate over the same period (down by £303m).
This trend towards financial caution is also reflected in a survey just out from Aon Consulting. It shows that, despite falling real earnings and rising unemployment, around one in five of the workers asked have increased contributions to their pensions in the last year.
It is a similar story in the US, where there are signs of consumers trying to cut their debt levels: the savings ratio has risen sharply and consumer confidence readings are still pathetically low. Last week, there was some excitement at a higher reading. But this only took confidence back to where it was last September (it is now very low rather than very, very low).
Of course, we aren’t all managing to spend less and to save more or pay down our debts. Moody’s notes that the number of prime borrowers in three months arrears on their mortgages is still rising: from 0.9% in the second quarter of last year to 1.8% in the second of this year. That’s a trend likely to continue as those on old-style low-cost trackers and fixes come to the end of their terms – and have to remortgage at today’s rather more unkind rates. But, this kind of thing aside, there is a clearly discernible trend across the once free-spending West: we want to get out of debt and we want to build up our savings as fast as we can.
But what next? The assumption is that, as the global economy starts to recover, we’ll get our credit cards out and head back to the shops. I wonder. We’ve all learnt some pretty nasty lessons about debt and how quickly an economy can turn from growth to collapse. And I’m not sure they are lessons we are going to forget in a hurry.
It could be that, rather than seeing a sudden return to the consumption patterns of the last few decades, the new frugality continues. We might get more confident about the future but it doesn’t necessarily follow that we will spend as we once did.
This is particularly likely in the UK, where personal debt is still shockingly high (over 160% of average disposable income) and where we know that, thanks to our ever increasing budget deficit, we are going to be paying much higher tax rates in the future. Perhaps not spending – or spending carefully – will be another ‘new normal’ for us.
If it is, you probably don’t want to be in retail. It is a nasty business to be in during a recession – but a particularly nasty one to be in when the number one social trend is frugality. That’s a good reason to keep away from almost all shop-related stocks.
The exception? Tesco (LSE: TSCO). Its current business fits perfectly into the new age of frugality and its shares aren’t expensive, but its new plans to “build a bank from scratch” make it particularly attractive. Current accounts and mortgages aren’t currently sold as cheap no frills products. But they should be. So it makes complete sense that they should be sold by Tesco.
• This article was first published in the Financial Times