Cocooning or flocking, we're still spending

AMERICANS, we are told, are cocooning. They have stopped taking planes. They have left restaurants half-empty. They have eschewed fashion, leaving supermodels with nothing to do.

But have they stopped spending money? Well, not exactly. Certainly, the terrorist attacks of September 11 have apparently turned them off the idea of splashing out on many of the fripperies that previously powered the boom in consumer spending. But instead, they are spending as if there were no tomorrow (which perhaps they fear there isn't) on everything imaginable to make a home secure, comfortable and a centre for entertainment.

Hence Tiffany's may be empty. The US fashion industry last week became so desperate that it launched a national campaign in an effort to pep up what it fears will be a dismal holiday shopping season. 'Do something you have to do - shop,' urged fashion designer Donna Karan.

But sales of TV sets, DVD players and stereo systems are going through the roof. Cocooning - a term, if I remember correctly, that was invented by the splendidly named American futurologist Faith Popcorn - has become the name of the game. Significantly, perhaps, it last found popular use when George Bush Senior was in power and bombing Iraq. Then, too, Americans decided that life felt safer and more comfortable at home huddled around the TV.

Why remark on this? Because it illustrates how difficult it is to read just how last month's terrorist attacks might affect consumer spending. Don't assume that spending on Main Street USA is going to fall across the board. Many retailers are suffering, certainly. But others - those selling the TVs, for example - are laughing.

The British picture
SO what effects are we seeing on the High Streets of Britain? Here the picture is even harder to divine. No official figures have yet given any sign that the boom in Britain's consumer spending is slowing. But we have not so far seen figures that give a picture for more than a few days immediately after the attacks.

Anecdotal evidence gives a mixed message. Debenhams has said that sales appear to have slowed in the past three weeks. Arcadia, of which more anon, says that when the bombing of Afghanistan started, there was a perceptible slowdown in sales, but they have now improved. John Lewis says its stores are struggling in the week to October 20, sales were £2m short of expectations. And there are stories that High Street retailers have been trimming their advertising budgets in the past couple of weeks.

Add all this up, and what do you get? Little more than a fuzzy, confused picture. Confused particularly because the past fortnight has been so curiously warm for late October, which means that the Arcadias, Debenhams and M&Ss of the world are not shifting the coats and knitwear they expected to. In large part, this can explain the sluggishness of clothing sales.

THERE is only one consistent theme - that if there is a slowdown, it has a strong geographical bias. Even those retailers who remain upbeat admit that London is being hit harder than other areas. This may be due - to use a recently coined phrase that even Faith Popcorn could be proud of - to a fear of flocking. And flocking comes no denser than in London.

Perhaps. But more likely, the impact of the loss of highly paid jobs in the City is beginning to filter through. Also, the housing market appears to be cooling more quickly in the South-East than elsewhere.

London boomed most dramatically when the good times were rolling. It rose fastest and has furthest to fall. Perhaps, just perhaps, the regions are about to have their reward - a softer, more cushioned landing.

The Iceman cometh...maybe
THE good folk at Arcadia were earnestly declaring last week that we must all take seriously the possibility of a bid from Baugur of Iceland, whose outline offer was flushed out on Thursday.

Well, they would say that, wouldn't they? After all, they have every reason to keep the share price up. But what seems clear is that the Icelanders, whose population is scarcely larger than Wrexham's, will need financial friends.

Frankly, it is far, far too early to say whether Baugur's Jon Johannesson and his Icelandic allies will be able to assemble the money to mount a bid that Arcadia's management could respectably accept.

What should not be in doubt is Johannesson's ambition. In Financial Mail in May, he made no secret of the fact that Baugur considered a bid when Arcadia was a lot more sickly than now. He said only that there would be no bid for six months - a deadline that is now expiring.

No, don't rule out a bid. Don't doubt Baugur's sincerity. But remain sceptical that anything will materialise soon.