We have known for some time that economists are expecting slower growth this year, but the messages now being put out suggest feelings are moving to the bottom end of the comfort scale.

The general mood was not improved when Rachel Lomax, the Bank of England's deputy governor, in a speech to the Institute of Economic Affairs in mid-February, said that the outlook for the UK economy in 2008 has "changed dramatically" with uncertainty over the full impact of "the largest ever peacetime liquidity crisis". The credit crisis will significantly reduce demand over the next two years, inflation will rise more sharply, and that may lead to higher interest rates than expected if prices and wages rise further.   The global financial crisis would act as "a significant drag" on demand over the next two years, and the situation could be even worse than expected, with a risk that the financial crisis will "persist and possibly intensify".  

Blip

So when in the same week the most upbeat of retailers reported a week's trade that was "one of the toughest in living memory", shockwaves hit the whole retail sector.  John Lewis has been a beacon, consistently delivering above-average growth; in the last year to January, its total sales rose by 5% and electrics six, with the first half a point or so higher than the second. 

The big question - was this a blip or a trend?  In this instance it turned out to be the former, with good weather and half-term holidays persuading families towards non-shopping activities, but the reaction exposed a severe nervousness about trading prospects.

As Dan Knowles, selling operations director, said:  "Every indication is that we continue to outperform a weak market - John Lewis remains the benchmark many others would like to reach.  One week is not a cause for doom and gloom, but things are definitely tougher than they were before Christmas.  Prudent retailers will be looking at their costs."  Indeed they will.

The following week (to 23 February) saw a welcome return to growth, but even so February as a whole was judged to be 'soft' with total sales up by just 1.7%, a slowdown, but still very respectable against the market.

'Electricals and home technology' had two good weeks out of four, ending up 3% higher year-on-year, helped by a vibrant online business.  John Lewis still expects electrics to do well this year, but is less optimistic about furniture, carpets and curtains. 

Plummet

Over at DSG, new chief executive John Browett is not letting the grass grow under his feet.  Fresh from the gardening leave his previous employer Tesco insisted upon, he arrived in December to find the business in a more parlous state than he may have expected, or than the head-hunters implied.  A disappointing trading update in early January was accompanied by a more cautious outlook for the year, and inevitably a profits warning.  The share price plummeted further and now stands at 65p, down by nearly two-thirds over the past year.

One of Browett's early moves was to hire Boston Consulting.  Bringing in costly management consultants is never that popular internally, but it seems a well-trodden route for new chief executives.  

So what might we expect?  Inevitably a new commitment to staff training and customer care to give a better in-store experience.  A change in the balance between store and online retailing.  Doubtless even more pressure on suppliers, both in terms of price and stock availability.  A restated desire to reap benefit from its huge pan-European buying power.  Improved systems co-ordination.  Another critical review of trading brands.  And some exits from peripheral and underperforming overseas markets.  In all, a mix of tweaking and surgery as it attempts   to win back ground lost over recent years.

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