Yes there are always exceptions and silver linings. It’s just that you have to search for them. The retail market is one such area where gloom and despondency are the prevalent themes of the day and seem to have been accepted as the norm. The truth is though that after our decade of retail boom we are having to adjust to this “new normal” of lower and slower growth as we re-establish the financial disciplines both for our personal and family lives as well as our government’s finances.

This has meant that those weaker retail models were the first to be squeezed and be forced out, but for others they have adjusted to the new leaner environment and have evolved accordingly. Retail spending doesn’t stop, but it does reduce to a new level and structure. Given the current position we can see how those at the more modest end of the economic world are coming under greater pressure. Those who are better off may have benefitted from record low interest rates resulting in significantly lower mortgage payments. Nonetheless, domestically the UK consumer has been losing confidence and thus expenditure trends have definitely become thriftier in the new world.

However, in the midst of this we can see two well known brands that have had a significant improvement in their figures. Firstly Harrods, which was purchased by the Qataris last year (from Mohammed al-Fayed) who obviously required a local convenience store to go with their recent property purchases in and around Knightsbridge. With perfect timing they have benefitted from a boom in sales at Harrods, whose annual sales breached the £1bn level for the first time and saw a 39% increase in profits to just over £108m (on a purchase price of £1.5bn). Harrods has benefitted directly from a boom in foreign visitors willing to spend in the eponymous brand store, not least of which of course are likely to have been its new owners. However, one interesting fact that came to light was that although many of the continental spenders may have gone away or trimmed their budgets, the other overseas shoppers from China, Indonesia (which I can personally attest to) and Taiwan have risen strongly. In fact apparently the average Chinese shopper spend was £3,500 for a single visit. Puts my purchase of a pound of pork sausages into some perspective.

Meanwhile, at the opposite end of the financial spectrum, we have the now 327 strong chain of stores of Poundland. This business has grown strongly in the downturn with revenues up 26% to £642 million. As the middle is squeezed, so they trade down. The question I can’t answer though is that if everything is a pound, how does Poundland have a sale?

It seems that China and the US are shaping up for another round of bickering over their currencies. This has become a familiar and often rather tedious argument between the deaf and the dumb and neither side taking notice of the arguments of the other. The Americans of course find themselves in an especially difficult position with their forthcoming elections and thus any properly thought through economic debate seems often to have been replaced by something more like a public rant with some rather worrying and vaguely racist undertones.

The Americans seem to think that a significant currency movement in the Yuan will solve all their problems, but that is unlikely to be the case. China is under pressure domestically, with social “strains” and rising costs, and a sudden sizeable rise in the currency is not what they want to have to bear. Last week’s figures implying a slowing in the economy seems almost humorous to the West where any growth would be greeted with enthusiasm, let alone 9.1% year on year. This in fact is its lowest since early 2009.

However, in a developing nation (and especially China) anything sub 7% will have a dulling effect and feel like a recession. China then is likely to be looking at another economic stimulus package, and that may well include domestic demand which should be of more appeal to the US. The problem is, though, there is remarkably little that the Americans produce that the Chinese consumer actually wants – after all they are making it anyway, as the West transferred production to them a couple of decades ago to get cheaper products.

The Paracell and the Spratleys are groups of islands I have gone on about before. These pin pricks of islands in the South China Sea are the source of aggravation with the national neighbours and they all claim a fair share of this sea. However China claims it all from the south coast of China itself down to the Malay Peninsula. As they have a bigger boat than anyone else then who is going to argue?

Now we hear that China has warned both the Indian and Vietnamese authorities over joint oil and gas exploration in these disputed waters. The somewhat terse statement from the Chinese authorities warned the Indians to “turn around at the soonest opportunity and leave the South China Sea”. That will cause ripples across India and especially in their continuing border disputes on its northern territories. This could turn out to be more than just a cursory flicking of handbags.

Now here is a contradiction. The US consumer has been spending more, with the latest Retail Sales figures increasing ahead of expectations at 1.1% on the month. Meanwhile the University of Michigan index of consumer confidence has fallen again to its lowest since 1980! Mr and Mrs Joe Shmo, the bedrock of the US economy, may be spending a bit more but not with any enthusiasm.

And finally.....

An artist arrested for applying body paint to a nude model in New York's Times Square will have charges against him dropped if his models strip naked only after dark, according to Reuters. Police arrested Andy Golub, 45, in July and charged him with violating public exposure and lewdness laws. He has been painting nude models for about three years.

Golub's lawyer argued that New York laws do not prohibit public nudity in the name of art, and thus a compromise was reached that was the basis of the court ruling. Under the agreement, "he is permitted to paint bare breasts anytime, anywhere, but the G-strings have to stay on until daylight goes out".

State laws against public exposure exempt "any person entertaining or performing in a play, exhibition, show or entertainment."
Mr Golub, of Nyack, New York, said he likes to paint nude models because their bodies have energy and dynamism that he finds lacking in canvas. "I feel that when I do live body painting it's a good thing, a positive thing," he said.

Charges against Golub will be dropped in six months if he abides by the terms of the agreement and is not arrested again. Charges against Karla Storie, a model from Texas arrested with him, will be dismissed if she too is not arrested again in the next six months.

Well it’s probably cheaper than canvas and you can always rub it off if you make a mistake.

Have a good week.

Justin A. Urquhart Stewart Director Seven Investment Management Limited