Customers wait to pick up online orders from Next in Liverpool, England, on Tuesday
Next’s credit sales were broadly flat or even slightly higher by the second half, having fallen 75 per cent year-on-year in April © AFP via Getty Images

Shoppers at Next, a UK clothing retailer, were once a microcosm. They spent more frugally with cash and paid down credit bills. So it was in the wider economy: in the US and most of Europe savings swelled and spending abated in the early stages of the pandemic.

Now redoubtable Next shoppers offer a glimmer of hope that debt-fuelled consumption may be creeping back, fuelling broader growth. The high street store chain’s credit sales, which plunged 75 per cent year-on-year in April, were broadly flat or even slightly higher by the second half.

Other purveyors of credit point to a similar waning of squeamishness about buying on tick. At Visa, the decline was less marked in the three months to end-September versus the previous quarter. Swedish credit upstart Klarna has seen demand explode, although that is partly a tribute to its attractive rates and a rapid increase of merchants coming on board.

For Next, the trend is a double win: its finance segment generated margins of 54 per cent the previous fiscal year, more than tenfold that on basic retail.

Bullish economists like to hazard there will be similarly rich pickings for the broader economy. Once vaccinated, the premise goes, people will be itching to get out and spend accumulated savings on holidays, clothes, cars and anything else that carries a price sticker.

That is overly optimistic. Households are continuing to deleverage. British consumers, pushed back into lockdown in November, made net repayments of £1.5bn that month, according to Bank of England data. That brings the repayment tally since the first lockdown in March to £17.3bn. Deposits meantime were up £17.6bn in the month, this despite interest income of half a percentage point or less. That matters both down among the clothes racks and at a macro level. Household consumption accounts for by far the lion’s share of expenditure.

Growing appetite for debt witnessed at Next came alongside chunkier repayments. Job uncertainty, a tattered economy and the likelihood of higher taxes do not encourage spending sprees. Britons will remain thrifty for a while longer.

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